Explaining the upswing in direct investment: A test of mainstream and heterodox theories of globalization

The internationalization of production has played an integral role in the process of globalization. Using data on direct investment out flow from 18 OECD nations and dynamic panel data methods, I explore various accounts of the recent upswing in direct investment outflow. I test a model that is informed by mainstream theories of international production and by heterodox theories of globalization. Consistent with mainstream theories, the results indicate that direct investment is affected by factors such as skill intensity and population. Support is also found for arguments that link direct investment to social democratic government, strike intensity, and union density. Contrary to the popular wisdom on globalization, the size of the social wage and de-commodification are found to be negatively related to direct investment outflow.