FDI Impacts On Exports

2.4.2 Impacts on Exports
FDI can play an influential role in international trade integration by promoting the host country’s exports through transferring new technology to produce new products and upgrade local employment skills (Zhang, 2005). Another possibility is that domestic firms can gain benefits from the existence of Multinational Corporations in their home country by investigating and learning from those Multinational Corporations which already have their own exporting channels and experience (Aitken et al., 1997). Moreover, Multinational Corporations affiliates in host economies often hold some advantageous positions such as owning brand names and operating international distribution-marketing networks through their parent companies;

Similar findings from oil exporting countries were found by Gawad and Muramalla (2013), who argue that FDI has a positive impact on exports of the Oil and Gas industries of 17 countries between 1995 and 2011. China also provides a clear example on the impacts of FDI on exports. The research of Naughton and Lardy (1996) and Zhang (2005) have empirically demonstrated a positive relationship between FDI and exports in china. From India, Banga (2003) finds that FDI had a positive impact on the diversification of Indian exports during the periods from 1994-1995 and 1999-2000. Rahmaddi and Ichihashi (2012) also finds a positive relationship in the Indonesian manufacturing sector as a result of the presence of FDI during 1990-2008. However, According to Zhang (2001b) there are some cases where FDI does not contribute to increasing the host country's exports. For example, a host country's market-seeking FDI would focus upon serving the domestic market instead of targeting exports and it may prevent the development of the host country's comparative advantages through its focus on the exploitation of cheap labour and raw

(2007), which covers the whole of the UK manufacturing sector from 1973-1992, finds that there is a positive relationship between the presence of FDI and total factor production, where an increase of 10 points in FDI's presence leads to a 5% increase in total production factors, which proves the existence of the indirect effects of FDI on local production. Zhang (2001) also concludes that FDI had positive effects on the Chinese economy in terms of technology diffusion during the period 1984-1998. However, within the same context, there is some research that calls into question the ability of FDI to achieve the transfer of technology to the host economy, based on the claim that Multinational Corporations do not transfer highly advanced technology to their affiliates in host countries in order to maintain the superiority of domestic firms, and to protect themselves from potential competition (Glass and Saggi, 1998). In addition, Multinational Corporations may not spend as much on R&D in the host economy as they do in the country of origin, for the purpose of maintaining their technological advantage, and so their superiority, over local firms (Forte and Moura,