IMF-外國直接投資碎片化有多普遍？How Widespread is FDI Fragmentation 2024

HowWidespreadisFDI

Fragmentation?

JoanneTan

WP/24/179

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progressbytheauthor(s)andarepublishedtoelicitcommentsandtoencouragedebate.

TheviewsexpressedinIMFWorkingPapersare

thoseoftheauthor(s)anddonotnecessarily

representtheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement.

NATn

2024

AUG

?2024InternationalMonetaryFundWP/24/179

IMFWorkingPaper

StatisticsDepartment

HowWidespreadisFDIFragmentation?PreparedbyJoanneTan

AuthorizedfordistributionbyCarlosSánchez-Mu?ozMarch2024

IMFWorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicit

commentsandtoencouragedebate.TheviewsexpressedinIMFWorkingPapersarethoseofthe

author(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement.

ABSTRACT:ThispaperexaminestheextenttowhichFDIhasfragmentedacrosscountries,thewaysithas

doneso,usingamodifiedgravityapproach.ThepaperfindsthatFDIfragmentationis,fornow,nota

widespreadphenomenon.Instead,fragmentationiscircumscribedintwoways.First,thepaperfindsthat

geo-economicfragmentationhasoccurredonlyforcertainindustriesthatlikelyhavestrategicvalue,includingcomputermanufacturing,informationandcommunications,transport,aswellasprofessional,scientificand

technicalservices.Secondly,fragmentationappearstobemorepronouncedforoutwardFDIfromtheUS,

notablyinashiftofUSFDIfromChinatoadvancedEuropeandtherestofAsia.Thisshiftappearstobedrivenbyboththeintensiveandextensivemargin.FragmentationisalsomorepronouncedforimmediateratherthanultimateFDI,withevidenceofultimateparentcompaniesaligningthegeopoliticalmixoftheirintermediaries

morecloselytothatoftheirfinalFDIhostdestinations.Overall,theresultssuggestthatfragmentation,wherefound,maybearesponsetotargetedpoliciesthathaveplacedcurbsoncertaintypesofFDIonnational

securitygrounds,ratherthananindiscriminatebreakupofinvestmentlinksbetweennon-allycountries.

JELClassificationNumbers:

F02,F12,F15,F21,F23,F52

Keywords:

Fragmentation;ForeignDirectInvestment

Author’sE-MailAddress:

JTan@

WORKINGPAPERS

HowWidespreadisFDIFragmentation?

PreparedbyJoanneTan

1

Contents

1Introduction

2

2Policybackground

5

3DataandStylizedFacts

12

3.1DataandmeasuresofFDI

12

3.2Stylizedfacts

15

4Empiricalspecification

32

5Results

34

5.1ThedeterminantsofFDI

35

5.2Fragmentationonaglobalscale

38

5.3Fragmentationbyregionalblocs

38

5.4Fragmentationattheindustrylevel

45

5.5FragmentationofFDIfromtheUSattheindustrylevel

53

5.6Firm-levelstudyofUSinvestors

58

5.7Thechoiceofintermediariesbyultimateparentcompanies

65

6Conclusion

69

7References

71

8Appendix

75

8.1Figures

75

8.2Tables

82

9DataAppendix

93

HowwidespreadisFDIfragmentation?

JoanneTan*March27,2024

Abstract

ThispaperexaminestheextenttowhichFDIhasfragmentedacrosscountries,thewaysithasdoneso,usingamodifiedgravityapproach.ThepaperfindsthatFDIfragmentationis,fornow,notawidespreadphenomenon.Instead,fragmentationiscircumscribedintwoways.First,thepaperfindsthatgeo-economicfragmenta-tionhasoccurredonlyforcertainindustriesthatlikelyhavestrategicvalue,includ-ingcomputermanufacturing,informationandcommunications,transport,aswellasprofessional,scientificandtechnicalservices.Secondly,fragmentationappearstobemorepronouncedforoutwardFDIfromtheUS,notablyinashiftofUSFDIfromChinatoadvancedEuropeandtherestofAsia.Thisshiftappearstobedrivenbyboththeintensiveandextensivemargin.FragmentationisalsomorepronouncedforimmediateratherthanultimateFDI,withevidenceofultimateparentcompaniesaligningthegeopoliticalmixoftheirintermediariesmorecloselytothatoftheirfinalFDIhostdestinations.Overall,theresultssuggestthatfragmentation,wherefound,maybearesponsetotargetedpoliciesthathaveplacedcurbsoncertaintypesofFDIonnationalsecuritygrounds,ratherthananindiscriminatebreakupofinvestmentlinksbetweennon-allycountries.

1Introduction

SincetheriseinUS-ChinageopoliticaltensionsandRussia’sinvasionofUkraine,economistshavebeguninvestigatingtheeconomicimpactsoftheseevents.Notably,recentpa-

pershaveexaminedwhetherthesetensionshavehadanyimpactonmultilateralismandspecifically,thefragmentationofeconomiclinksacrosscountries.Whilethereisnotext-bookdefinitionofgeo-economicfragmentation,thegeneralconsensusintheliteratureis

*InternationalMonetaryFund.Email:jtan@.TheviewsexpressedhereinarethoseoftheauthorsanddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement.

3

thatfragmentationreferstothereversalorslowdownofeconomicintegrationbetweencountriesalonggeopoliticallines.Variousfacetsofeconomicrelationsbetweencountrieshavebeenstudied,includingtrade,currencychoiceinforeignreserves,financialmar-ketsanddirectinvestments.Thispaperfocusesonthegeo-economicfragmentationofforeigndirectinvestment(FDI).Inparticular,itaddressesthequestionoftheextenttowhichFDIhasfragmented,thewaysinwhichithasdonesoandwhetheranyfragmen-tationobservedisrobustandsignificant.UnderstandingwhetherFDIhasfragmentedandthenatureofsuchfragmentationisimportant,giventhatFDIisapotentialdriverofproductivitygrowth

.1

Usingamodifiedgravityapproach,thepaperfindsnosignificantwidespreadfragmenta-tioninFDIbygeopoliticaldistanceinanysub-periodfrom2009to2021,aftercontrollingforcountrypairfixedeffects,timedummiesandarangeoftime-varyingsourceandhostcountrycontrols.Instead,thepaperdemonstratesthatthefragmentationofFDIistar-geted,localized,beginsafter2013andacceleratesafter2018

.2

FDIfragmentationiscircumscribedintwoways.First,thepaperfindsthatgeo-economicfragmentationhasoccurredonlyforindustriesthatlikelyhavestrategicvalue,includingcomputermanufacturing,informationandcommunications,transport,aswellasprofes-sional,scientificandtechnicalservices.Secondly,fragmentationappearstobemorepro-nouncedforoutwardFDIfromtheUSandislesssignificantforcountriesinadvancedEurope.Notably,thepapershowsthatFDIfromtheUShasdecoupledfromChina,withUSinvestmentshiftingtowardsadvancedEuropeandtherestofAsia.Thisdecouplingisasymmetric,asChina’sFDItotheUSandtotheWestingeneraldoesnotappeartohavedeclinedeitheronrelativeorabsoluteterms.

ForacomprehensivepictureofFDIfragmentation,thepaperconstructsandemploysseveralmeasuresofFDIpositions,distinguishingrealFDIfromFDIinspecialpurposeentities(SPE),immediateFDIfromultimateFDI,aswellasverticalFDIfromhorizontalFDI.ThepaperdefinesrealFDIasFDIthatisnotplacedinSPEs,whereaSPEisafirmthatreceivesdirectinvestmentbuthasnotangibleimpactonthehosteconomy.

3

Immedi-

ateFDIreferstoFDIsentfromimmediateshareholderstotheirhostdestinations,without

1See

Alfaroetal.,2009,

MalikovandZhao,2023,

Borenszteinetal.,1998,

Fodaetal.,2024,

Vaziri,2021

ontheeconomicimpactofFDI.

2Inthispaper,asourcecountryreferstothecountryfromwhichFDIissent,whileahostcountryreferstothecountrywheretheFDIisreceived.Iusethetermshost,destinationandrecipientcountryinterchange-ably.Ialsousethetermssourceandinvestorcountryinterchangeably.

3Following

Damgaardetal.,2019

,IdefineaSPEasaFDIrecipientfirmthatemployslessthan5em-ployeesandassetsperemployeeexceeding10millionUSD.

4

anyintermediaryinathirdcountry.Incontrast,ultimateFDIrefersallFDIsentfromanultimateparentcompanytotheirhostdestinations,whetherornotthereareintermedi-ariespresentinothercountries.Inturn,theultimateparentshareholderisnotownedbyanyothercompany.Lastly,verticalFDIreferstoFDIthatissentfromaparentcompanytoahostcompanywiththesame4-digitindustrycode,whilehorizontalFDIreferstoFDIthatissentfromparenttohostcompaniesindifferentindustries.

Thepaperfindsthatfragmentationismorepronouncedforimmediateratherthanulti-mateFDI,andisslightlylesslikelysignificantforverticalFDI.Theseresultsimplythatultimateownershipdecisionsofparentcompaniesarelessinfluencedbygeopoliticalten-sions,comparedtoimmediateFDI.Inaddition,productiondecisionsandtheirassociatedsupplychains,reflectedmoreinverticalthanhorizontalFDI(see

Ramondoetal.,2011

and

Spearot,2013

),aresomewhatlessimpactedbygeo-fragmentation.Next,thepaperattemptstoexamineiftheobservedfragmentationofUSFDIisdrivenbytheintensiveorextensivemarginoffirmdecisions

.4

Itfindsthattheintensivemarginisinsufficienttoaccountforfragmentationanddeducesthattheextensivemarginislikelytohavealsoplayedarole.

Lastly,toexplorewhetherultimateparentcompanieshavealteredtheirownershipnet-worksinresponsetogeopoliticaltensions,Iestimatetheextenttowhichultimateparentfirms’choiceofintermediariesisimpactedbytheirgeopoliticalproximitytothefinalhostdestinations.Ifindthat,comparedtothereferenceperiod,ultimateparentcompaniesthataregeopoliticallydistantfromtheirfinalFDIhostsaremorelikelytochooseintermedi-ariesthataregeopoliticallyclosetotheseFDIhostcountries.ThisevidencesuggeststhatparentcompaniesmaybeseekingtocircumventfutureFDIbariersinhostcountriesbychannelingtheirFDIthroughintermediarycountriesthataregeopoliticalclosetothesehosts.

Takentogether,theresultssuggestthatfragmentation,wherefound,maybearesponsetorecenttargetedpoliciesthathaveplacedcurbsoncertaintypesofFDIonnationalsecuritygrounds,ratherthananindiscriminateseveranceofinvestmentrelationsbe-tweennon-allycountries.Thispaperrelatestotwomainstrandsofliterature.Thefirststrandconsistsofthenascentliteratureontheimpactofrecentgeopoliticaltensionsonthemacroeconomy.Inthisliterature,thepapers,including

FajgelbaumandKhandelwal,

2022,

Felbermayretal.,2023,

SmarzynskaJavorciketal.,2022,

Aiyaretal.,2023

,

Góesand

Bekkers,2022,

Antràs,2020

and

Ahnetal.,2023

,exploretheeconomicimpactoftheUS-

4Specifically,theintensivemarginreferstothesizeofinvestmentbyfirmsalreadyinvestinginagivenhostcountrywhiletheextensivemarginreferstothedecisionbyfirmswhetherornottoinvestinacountry.

5

Chinatradewar,thede-globalizationofthesupplychain,friend-shoring,near-shoring,aswellastheconsequencesofsuchfragmentation.Whilemostofthesepapersdealwithtradefragmentation,thispaperrelatesmostcloselyto

Ahnetal.,2023

,whoprovidede-scriptiveevidenceofthefragmentationofgreenfieldFDI,basedonasampleof300,000greenfieldFDIprojectsfrom2003to2022.ThispaperaddstotheliteraturebyprovidingaviewofFDIfragmentationthatiscomprehensiveintermsofcoverage,measuresofFDIandmeasuresofgeopoliticaldistance.Italsoteststherobustnessoffragmentationtrendsfoundwithanumberofgravityspecificationsandarichsetofcontrols.Itfindsthat,justasfortrade,therehasbeennowidespreaddismantlingofFDInetworksandthat,instead,FDIfragmentationisaqualifiedphenomenon.

ThesecondstrandofliteratureiscomprisedofpapersthatstudythedeterminantsanddistributionofFDI,eithertheoreticallyorempirically.ThisstrandincludespapersthatlookatmodelsonthedeterminantsofFDI,suchas

Davisetal.,2021,

BlonigenandPiger,

2014,

NockeandYeaple,2008

and

Jardetetal.,2023

,aswellasthosethatdelveintofirm-levelinvestmentdecisionsmadebymultinationals,suchas

Yeaple,2009,

Antràsand

Yeaple,2014

and

Antrasetal.,2009.Amidstthisbroadliterature,thepaperismostclosely

relatedtothosethatseektoempiricallymodelFDIusingagravityapproach,including

HeadandRies,2008,

DeSousaandLochard,2011

and

Blonigenetal.,2007

and

Keller

andYeaple,2013.

Whilethegravitymodelhasconventionallybeenusedtostudytrade

(HeadandMayer,2014

and

Anderson,2011),thesepapershavederivedtestableempirical

gravityspecificationsforFDIlinksbetweencountries,startingfromsimpletheoreticalframeworks.Thispaperadaptstheliterature’sgravityapproachtoincorporatemeasuresofgeopoliticaldistanceandtheirinteractionwithtime,toestimatewhethertheimpactofgeopoliticaldistanceonFDIhaschangedsignificantlyinrecentyears.

Thispaperisdividedintofivesections.Thesecondsectionprovidesabackgroundonre-centFDIpolicies.Thethirdsectiondescribesthedata,theconstructionofdifferentmea-suresofFDIandpresentssomestylizedfacts.Thefourthsectiondiscussestheempiricalstrategy,whilethefifthdelvesintotheestimationresults.Thelastsectionconcludes.

2Policybackground

ThissectionexploresthetrendsinFDIpoliciesandnotesifandwhenbarrierstoFDIhaverisenovertime.Ingeneral,onecanobservethattherehasbeenadeclineingeneralFDIrestrictionsacrosscountries.UsingdatafromtheOECDonselectedcountries,Figure

1

displaysanestimatedindexofopennesstoinwardFDI,whichrangesfrom0(fullyopen,

6

norestrictions)to1(fullyclosedtoinwardFDI),aggregatedbyregionalgroups

.5

Fromthefigure,apartfromcountriesintherestoftheworld(RoW),noneoftheotherregionalblocshaveexperiencedariseinFDIrestrictiveness

.6

Forinstance,whileChinahasbeenthemostFDIrestrictiveblocsince2009,ithasbecomelessrestrictiveovertime,startingfrom2015.

Figure1:IndexofrestrictionstoinwardFDI

InsteadofageneralriseinFDIrestrictions,therehasinsteadbeenaseriesofspecificandtargetedpoliciesadoptedbysomecountriethathaspromptedrecentworriesaboutgeo-economicfragmentation.Figure

2

presentsthetimelineofsomerecenteventsthatmayhaveshapedFDItrendsamongcountries.Whilenotexhaustive,onecannotethatsince2012,therehasbeenaseriesofpoliciesseekingtoinfluencethepatternsofbothinwardandoutwardFDI.

Fromitsinceptionin1975,theUSgovernment,viatheCommitteeonForeignInvestmentintheUS(CFIUS),hadonlyobstructedfiveFDIdealspriortothe2010s.Startingfrom

5TheFDIrestrictivenessindexisnotavailableforallcountries.Forthefulllistofreportingcountries,thereaderisinvitedtoreferto

/FDI/FDI-RESTRICTIVENESS.HTM.

6CountriesinadvancedEuropeincludeAustria,Belgium,Cyprus,CzechRepublic,Denmark,Estonia,Finland,France,Germany,Greece,Iceland,Ireland,Italy,Latvia,Lithuania,Luxembourg,Malta,Nether-lands,Norway,Portugal,SanMarino,SlovakRepublic,Slovenia,Spain,Sweden,Switzerland,UnitedKing-dom.AllothercountriesontheEuropeancontinentareinemergingEurope.ChinaincludesHongKong,MacauandmainlandChina.

7

2012,theObamaadministrationrestrictedtwoinvestmentsfromChinaonnationalse-curitygrounds,thefirstbeingHuawei’sattemptedacquisitionofaUSservertechnologyfirm,3Leafsystems,andthesecondbeingtheforceddivestmentofChineseinvestorsinUSwindfarms

.7

In2013,ChinalaunchedtheBeltandRoadInitiative(BRI),followedbythe‘MadeinChina’strategyin2015,thatmaystrategicallyshapethepatternsofFDIinandoutofChina

.8

Inthesameyear,theChinesegovernmentpublishedadraftlawaimedatregulatingFDIinindustriesrelevanttonationalsecurity.Thisdraftlaw,alongwithanewnationalsecuritylaw,waseventuallyenactedin2020.Thelistofsectorswithnationalsecurityimplicationsislong,rangingfromthemilitary,toagriculturalproducts,

manufacturingandinformationtechnology.

9

Since2016,theUSand,toalesserextent,theEUhaveadoptedfurtherFDIrestrictions.InDecember2016,theObamaadministrationorderedCFIUStoblockthesaleofaUS-basedsemi-conductorfirmtoacompanyownedbyChinaonnationalsecuritygrounds

.10

CFIUS’spowerstorestrictFDIintotheUSfornationalsecurityreasonswereexpandedin2018,withtheadoptionoftheForeignInvestmentRiskReviewModernizationAct(FIR-RMA)

.11

Thiswasfollowedin2021withthepassingoftheInnovationandCompetitionActthataimedtopreventtheappropriationofUSinnovations

.12

Mostrecently,inAugust2023,theBidenadministrationturnedattentiontooutwardFDIfromtheUS,byaddingrestrictionsonhigh-techUSinvestmentstoChina

.13

AsuccinctsummaryofthenationalsecurityconcernsrelatingtoFDIintheUSisprovidedby

Mastersetal.,2023.

Likewise,theEUcommission,concernedwiththesecurityimplicationsofFDIintheunion,pro-posedaframeworktoreviewFDIinstrategicsectorsin2017.Thisnewregulationwasadoptedin2019bytheEUparliament

.14

ToexaminebilateralFDIrestrictionsbetweencountryhostandsourcepairs,Iuseinfor-mationonthenumberofFDI-relatedbarriersannounced,providedbytheGlobalTradeAlert(GTA)database,whichcollatesinformationonstateinterventionsthatimpacttrade,

7/article/us-huawei-3leaf-idUSTRE71I38920110219

and

https://www.

/article/us-usa-china-turbines-idUSBRE88R19220120929.

8/backgrounder/made-china-2025-threat-global-trade.

9See

/content/dam/cliffordchance/briefings/2015/02/

china-proposes-new-foreign-investment-law.pdf.

10/analysis/president-obamas-second-order-cfius.

11/content/a819ec8a-79f4-11e8-8e67-1e1a0846c475.

12

/analysis/what-us-innovation-and-competition-act-gets-right-and-what-it-gets

-wrong.

13See

/backgrounder/contentious-us-china-trade-relationship.

14See

https://eur-lex.europa.eu/procedure/EN/2017_224.

8

migrationandforeigndirectinvestment

.15.

Figure

3

plotstheflowofFDIpoliciesan-nouncedthatobstructFDIyearlyfrom2008to2023betweentheUSandChina

.16

FromFigure

3

,theUSrecordedonestateinterventionin2012targetingFDIfromChinaandnoneinanyotheryearbefore2016.From2016,however,theUSgovernmentintroducedatleastoneFDIbarriertoChineseinvestmentperyear,peakingatfourpoliciesayearbetween2018and2020.Incomparison,ChinaenactedthreeFDIbarrierstargetingtheUSandthreein2018,withnootherrecordedpoliciesoutsidetheseyears.WhiletheoverlapbetweentheeventsinFigure

2

andFigure

3

isnotperfect,bothfiguressuggestariseinUSpoliciesrestrictingChineseinvestmentfrom2016andaone-offspikeinChinesebarrierstoUSinvestmentinthesameperiod.

TogiveaglobalviewoftrendsinFDIbarriers,Figure

4

displaysthenumberofFDIbarriersacrossregionalblocs,asannouncedbytheUS,ChinaandcountriesinadvancedEurope.Fromthefigure,thereisaclearspikeinFDIbarriersbytheUStargetedatChinafrom2016,evenrelativetootherregions.ApartfromtheoneFDIbarrierannouncedbyChinatargetingtheUSin2018,therewerenootherFDIbarriersraisedbyChina.Lastly,fromFigure

4

c,therewasasharphikeinFDIbarriersannouncedbyadvancedEuropeagainstemergingEuropein2021,butnodiscerniblespikebetween2015and2020.

Together,thesedescriptiveresultsonFDIpolicysuggestthatwhilebarrierstoFDIhavebeenloweredingeneralovertime,theyhaverisenperceptivelybetweentheUSandChina,andbetweenemergingandadvancedEurope.Thenextsectionmovesontoex-aminewhetherthesechangesinFDIpolicycorrespondtorealizedchangesinFDI,ontopofdescribingthedatasetsusedandtheconstructionofkeyvariables.

15Thedatacanbefoundat:

/

16ThesearetheFDIpoliciesclassifiedasredoramberintheGTA.

Juhászetal.,2022

providesadetaileddescriptionofthehowtheGTAdatacanbeused.

2012:

CFIUSblocks

Huawei’sacquisitionof3leafSystems,

ordersdivestmentofUSwindfarmsby

Chinesefirm.

2015:

ChinaannouncesdraftFDIlaw&‘MadeinChina’strategy.

2017:

EUproposesnewFDI

screeningframework.

2020:

ChinapassesFDIlaw.

2023:

U.S.limits

high-techFDItoChina.

9

2009

2013:

BeltandRoadInitiative

launched.

2016:

CFIUSblocks

Chineseacqui-sitionofsemi-conductorfirm.

2018:

FIRRMAex-

pandsCFIUS’powersto

blockFDIinto

theUS

2021:

U.S.Innova-tionandCom-petitionAct

passed.

Chinapassesnationalsecu-ritylaw.

Figure2:TimelineofkeyFDIpolicies

10

Figure3:AnnouncementsofnewFDIbarriersbetweentheUSandChina

(a)AnnouncedbytheUS(b)AnnouncedbyChina

11

(c)AnnouncedbyadvancedEurope

Figure4:AnnouncementsofnewFDIbarriersbetweenregionalblocs

12

3DataandStylizedFacts

ThepaperemploysseveraldatasetstoexamineFDIfragmentationinacomprehensivemanner.Inthissection,IfirstdescribethedataandhowthevariousmeasuresofFDIpositionsareconstructed.IthenpresentaseriesofstylizedfactsonFDIfragmentation.

3.1DataandmeasuresofFDI

DuetolimitedinformationonbilateralFDIflowsacrosscountries,thispaperfocusesexclusivelyonFDIpositions(stocks)

.17

CDISTheCoordinatedDirectInvestmentSurvey(CDIS)isaworldwidecountry-leveldatabaseadministeredbytheIMF,beginningfrom2009.Foreachreportingcountry,theCDIScollectsinformationonaggregateinwardandoutwardFDI,aswellasbilateralFDIbetweencountries.ThecoverageoftheCDISiswide,with110reportingcountriesasof2022.Moreover,fornon-reportercountries,inwardandoutwardbilateralFDIcanstillbeestimatedusingmirrordatafrompartnercountries.ItshouldbenotedthatthebilateralFDIvaluesintheCDISrefertototalimmediateFDIbetweensourceandhostcountries

.18

Otherwiseput,theCDISneitherdistinguishesrealFDIfromFDIinSPEsbetweencountriesnormeasuresbilateralFDIbyultimateownership.

OECDSincetheCDISdoesnotbreakdownFDIintorealFDIandinvestmentinSPEs,IuseannualbilateralFDIandSPEdataforreportingOECDcountriestoimputetheshareofSPEsoutoftotalFDI,soastoconstructthelevelofrealbilateralFDIforallcountries,following

Damgaardetal.,2019.

19

AdescriptionofhowrealFDIisimputedfortheCDISusingtheavailablebreakdownintheOECDdataisprovidedintheDataAppendix.TherestofthispaperfocusesprimarilyonrealFDI.

OrbisOrbisprovidesfirm-levelbalancesheetandshareholderdataforover448mil-lioncompaniesworldwide.ItcontainssufficientshareholderandsubsidiaryinformationtocalculatethelevelofFDIofshareholderfirmsintheirsubsidiaries.Italsocontains

informationonbothimmediateandultimateinvestors,whichallowsforaclearerview

17Whilesomecountries,includingtheUS,publishdataonbilateralFDIflows,suchinformationisabsentformostcountries.InformationonFDIflowsisalsonotbroadlyavailableatthefirmlevel.

18Thedatacanbeaccessedat

/?sk=40313609-f037-48c1-84b1-e1f1ce54d6d5&

sid=1482334777935.

19ThedatacanbeaccessedontheOECDDatapage.

13

ofultimateownershiplinksthatmaybemaskedwhenlookingsolelyatimmediatein-vestors.Inaddition,Orbisalsocontainsindustryinformationonbothshareholderandsubsidiaries,whichallowsforabilateralindustrybreakdownofFDI,aswellasinforma-tiononemployeenumbersandtotalfirmassets,allowingfortheidentificationoflikelySPEs.Inthispaper,Iuse2009to2021vintagesofOrbistoimputeultimatebilateralFDIacrosscountries,followingthestepslaidoutin

DamgaardandElkjaer,2017

,country-levelbilateralverticalFDI,aswellascountrybyindustrybilateralFDI

.20

UsingtheindustryinformationfromOrbis,IalsoimputebilateralverticalFDIacrosscountries,where,fol-lowingtheliterature,verticalFDIisdefinedasFDIfromashareholderfirmthatdoesnotsharethesamefour-digitindustrycodeasitssubsidiary(

AlfaroandCharlton,2009

),asopposedtohorizontalFDI,whereshareholderandsubsidiarysharethesameindustrycode.ThedistinctionbetweenverticalandhorizontalFDImaybeimportant,sincever-ticalFDIrelatesmoretoproductionandsupplychaindecisionswhilehorizontalFDIisoftenawayforfirmstogainmarketaccess,asasubstitutetotrade(

Atalayetal.,2014,

Andersonetal.,2019

and

AlfaroandCharlton,2009

).Inaddition,thefirm-levelaspectoftheOrbisdataisexploitedtorunfirm-levelanalysisofUSoutwardFDI.NotethatwhiletheOrbisdataisrich,thereareseveralimportantlimitationstoOrbis,notablywithregardstodifferinglevelsoffirmcoverageacrosscountries.Adetailedguideonusi