Source: NORTH DAKOTA STATE UNIV submitted to NRP
THE IMPACT OF FOREIGN DIRECT INVESTMENT ON AGRICULTURE IN THE UNITED STATES
Sponsoring Institution
National Institute of Food and Agriculture
Project Status
ACTIVE
Funding Source
AFRI COMPETITIVE GRANT
Reporting Frequency
Annual
Accession No.
1031666
Grant No.
2020-67024-41498
Cumulative Award Amt.
$368,145.76
Proposal No.
2023-03533
Multistate No.
(N/A)
Project Start Date
Nov 1, 2022
Project End Date
May 31, 2026
Grant Year
2024
Program Code
[A1641]- Agriculture Economics and Rural Communities: Markets and Trade
Recipient Organization
NORTH DAKOTA STATE UNIV
1310 BOLLEY DR
FARGO,ND 58105-5750
Performing Department
(N/A)
Non Technical Summary
This project aims at measuring the impact of foreign direct investment on agriculture in the United States. These investment activities are vital for the agricultural and food industry as they ensure economic growth and prosperity, create highly- compensated jobs, spur innovation, and drive international trade. However, so far, we know little about the impact of these investment activities on firm performance and spillover effects on domestic firms. Therefore, this project will develop a framework to precisely measure the impact of foreign direct investment on firms operating in the agricultural and food industry. We will accomplish this task by compiling a novel dataset on investment activities and linking this data to detailed productivity and efficiency measures collected at the firm level. By exploiting changes in investment activities over time and across industries, we disentangle the effect of foreign ownership on firm performance. The analysis will enable us to measure the impact on foreign subsidiaries and investigate spillover effects on domestic firms. Therefore, our project will enhance the understanding of a highly relevant policy issue that has been largely neglected in the empirical literature on foreign trade and investment while being of vital importance for the future of agriculture in the United States. Such understanding provides the foundation for fact-based public discussions and allows for informed decisions. Consequently, this project enhances market efficiency and performance by providing essential knowledge on the functioning of markets in light of changing trade and investment environments.
Animal Health Component
(N/A)
Research Effort Categories
Basic
100%
Applied
(N/A)
Developmental
(N/A)
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
60661203010100%
Knowledge Area
606 - International Trade and Development;

Subject Of Investigation
6120 - International economy and sectors thereof;

Field Of Science
3010 - Economics;
Goals / Objectives
The long-term goal of this project is to precisely measure the impact of foreign direct investment on agriculture in the United States. We accomplish this task by developing a novel dataset on foreign investment activities and linking it to detailed productivity and efficiency measures at the firm level. By comparing firms with and without foreign ownership, we disentangle the impact of foreign investment activities on labor and capital productivity and evaluate the associated consequences for production efficiency. This analysis allows us to precisely identify the economic implications of foreign ownership and measure the impact of spatial and product-space spillover effects on domestic firms. Consequently, this project will provide essential knowledge on the functioning of markets in light of changing trade and investment environments, thereby enhancing market efficiency and performance.
Project Methods
This research advances the understanding of the consequences of foreign direct investment in the agricultural and food industry of the United States. We achieve this goal by developing a novel dataset and using innovative analytical methods to precisely measure the impact of foreign ownership on firm performance and evaluate spillover effects on domestic firms. Until now, most studies investigating these effects rely on inconsistent data sources to construct their primary dataset for causal inference. The use of this data results in biased estimates and limits the researchers' ability to detect causal relationships. To account for this issue, we will circumvent the inconsistent public data sources and collect primary data on foreign direct investment and firm performance from privately owned data sources. We will create a comprehensive dataset that will allow us to measure productivity and efficiency at the firm level. We will use these performance measures to investigate the impact of foreign ownership on agriculture and measure spillover effects on domestic firms. Because our empirical approach relies on variation in foreign investment activities and firm performance over time and across industries, the research design allows us to obtain causal inferences of the relationship relying on difference-in-difference estimation techniques.Our research project will also enhance our knowledge of a highly relevant policy issue largely neglected in the empirical literature while being vital for the future of agriculture in the United States. The causal inference of this relationship is critical because such knowledge provides the foundation for a public discussion based on facts and allows for informed decisions. Because a considerable share of the domestic supply chain is in foreign hands, these companies play an essential role in satisfying the food and fiber needs. Therefore, disputes over foreign investment activities have the potential to strongly impact the economic viability of agriculture in the United States. This issue becomes increasingly important in light of recent trade and investment disputes with foreign partners such as Canada, China, and the European Union. Therefore, it is also necessary to mention that foreign direct investment can have a considerable impact on the decision of foreign firms to allocate resources and entail substantial consequences for the well-being of farmers and food producers as well as our society as a whole.

Progress 11/01/23 to 10/31/24

Outputs
Target Audience:The project reached academic and public audiences through publications, conference participation, and media interviews. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?The project has provided significant opportunities for training and professional development, particularly for the postdoctoral researcher. This includes hands-on experience in constructing and analyzing novel datasets, developing advanced econometric models, and applying cutting-edge methodologies to assess the impacts of foreign direct investment on U.S. agriculture. The postdoc has also gained valuable skills in research dissemination through co-authoring publications, presenting findings at conferences, and participating in stakeholder engagement activities, which collectively enhance their expertise and career readiness. How have the results been disseminated to communities of interest?In the next reporting period, we will finalize the data analysis to quantify the impact of foreign direct investment on firm-level productivity, efficiency, and spillover effects. We will complete the first draft of the paper and mentor the postdoctoral researcher in advanced econometric techniques and research dissemination. Additionally, we will engage with stakeholders to validate findings and prepare for conference presentations and publications to share our results. What do you plan to do during the next reporting period to accomplish the goals?In the next reporting period, we will finalize the data analysis to quantify the impact of foreign direct investment on firm-level productivity, efficiency, and spillover effects. We will complete the first draft of the paper and mentor the postdoctoral researcher in advanced econometric techniques and research dissemination. Additionally, we will engage with stakeholders to validate findings and prepare for conference presentations and publications to share our results.

Impacts
What was accomplished under these goals? The dataset is complete, and we're making progress on drafting the paper. Our work focuses on understanding how foreign direct investment impacts U.S. agriculture. By linking foreign investment data to detailed firm-level productivity measures, we're able to compare foreign-owned and domestic firms. This lets us explore differences in productivity, efficiency, and spillover effects. Ultimately, we aim to provide clear insights into how changing trade and investment patterns shape market dynamics.

Publications

  • Type: Peer Reviewed Journal Articles Status: Published Year Published: 2024 Citation: Dongin Kim and Sandro Steinbach (2024). The Linder Hypothesis for Foreign Direct Investment Revisited, Review of International Economics, 32(4): 19011928.
  • Type: Peer Reviewed Journal Articles Status: Published Year Published: 2024 Citation: Dongin Kim and Sandro Steinbach (2024). Rising Protectionism and Foreign Direct Investment, Review of World Economics, first published online.


Progress 11/01/22 to 10/31/23

Outputs
Target Audience: Nothing Reported Changes/Problems:Due to the project being transferred from the University of Connecticut to North Dakota State University, the project activities have been delayed 1.5 to 2years. During this period, we could not support project activities, such asa graduate student, a postdoc, or the principal investigator's time. What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest? Nothing Reported What do you plan to do during the next reporting period to accomplish the goals?We will complete the remaining objectives in the two remaining reporting periods. Due to the project transfer from the University of Connecticut to North Dakota State University, the project is delayed by 1.5 years. We were not able to fund a graduate student, postdoc, or PI time during that period.

Impacts
What was accomplished under these goals? There havebeen no accomplishments during the reporting period because the project was in transition between universities during that entire time.

Publications