Domestic and Foreign Investment by Swedish Multinationals

In the 1980s, there was a huge increase in the outflow of foreign direct investment from Sweden to the EC. The EC market is the most important for Swedish firms and it is during the last decade that EC has undergone major changes. This paper uses a unique data set on individual Swedish MNCs for the years 1978, 1986 and 1990 to determine how FDIs in the EC have affected firms' propensity to invest in the home country. The model includes a financial constraint for MNCs which is consistent with the assumption that different investment projects are competing for scarce funds