Outward Foreign Direct Investments as a Catalyst of Urban-Regional Income Development? Evidence from the United States

Challenging populist views of outward foreign direct investments (OFDIs) that suggest they move prosperity abroad, this article builds a model suggesting that OFDIs support urban-regional income levels due to (1) labor; (2) knowledge; and (3) multiplier, spillover, and intermediate input effects. In a panel study of median incomes in US urban regions between 2005 and 2013, we first establish a base model that measures income as a function of local factor endowments (high skill levels, fast-growing and technologically sophisticated industries, and urban scale effects). This base model is highly significant. In the next step, we extend this model by adding our main variables of greenfield inward and outward investment intensity, and finally we integrate other indicators that measure the geographic, industrial, and functional composition of OFDIs. While the results for other investment-related indicators are mixed, the main investment variables are highly significant, thus providing strong support that greenfield OFDIs act as a catalyst of urban-regional income development.