Have Robots Grounded the Flying Geese? Evidence From Greenfield <scp>FDI</scp> Announcements

Abstract

ABSTRACT For decades, manufacturers around the world have outsourced production to countries with lower labour costs. However, there is a concern that robotisation in high‐income countries will challenge this shifting international division of labour known as the ‘flying geese’ paradigm. Exploiting differences across countries and industries over time, the intensity of robot use in industrialised countries (HICs) is positively associated with growth in greenfield foreign direct investment (FDI) announcements from industrialised to developing countries between 2004 and 2015. Past a threshold, however, increased robotisation in industrialised countries is negatively associated with this FDI growth. Only 3% of the sample exceeds the threshold level beyond which robotisation is associated with negative FDI growth. For another 25% of the sample, this association is positive, but declining. Therefore, robotisation is associated with growing FDI to countries with lower labour costs for much of the sample.