Determinants of international activity: evidence from the chemical processing industry

Abstract

This paper empirically investigates two important determinants of international activity through wholly owned operations, joint-ventures and technology licensing, namely country risk and intellectual property rights (IPRs) protection. Using a comprehensive database on investments in chemical plants during the period 1981–1996, we show that higher levels of country risk are associated with less activity into recipient economies. The analysis also suggests that international activity with smaller resource commitment tends to be preferred in countries with higher levels of risk, and that multinational investment is more responsive to changes in risk conditions than indigenous investment. After controlling for several country characteristics, we do not fin IPRs protection playing a significan role in fostering international activity or conditioning its mode.