FOREIGN DIRECT-INVESTMENT IN AMERICAN SERVICE SECTORS - SOURCE COUNTRY CONTRASTS AND LOCATIONAL DETERMINANTS

Foreign direct investment in United States service sectors is an essen tial component of the competition among global industrial core regions . European, Canadian, and Japanese firms generate most foreign service s jobs. Acquisition is the favored mode of entry and foreign establish ments are generally larger and pay higher wages than their domestic co unterparts. Though the surge of foreign investment in the 1980s was se ctorally extensive, jobs in foreign services firms grew much faster th an those in manufacturing. This paper reports a regression analysis of the location of foreign employment in six disaggregated sectors acros s U.S. states in 1987. The results show that foreign and domestic inte rstate locational patterns of employment strongly correlate. Because a cquisition is the most common mode of entry, this empirical finding su ggests that the supply of acquisition candidates primarily decides for eign investors' locational choices. Additional influences on location include the concentration of jobs in foreign business and professional services firms in localized areas of production, a general attraction of foreign investors in most service sectors to states with skilled l abor forces, and an avoidance of Rocky Mountain and Great Plains state s. I found little evidence that foreign investors in services avoid hi gh-wage states more than their domestic counterparts.