Impact of Direct Investment Abroad on Firm-Level Outcomes of Singapore-Based Firms

Singapore’s stock of Direct Investment Abroad (DIA) grew significantly from S$97.5 billion in 2000 to S$934.7 billion in 2019, reflecting in part the result of Government’s ongoing efforts to encourage Singapore-based firms to expand overseas. A key impetus for these efforts is the recognition that Singapore has a small domestic market. Another reason is the belief that expansion abroad improves the outcomes of firms’ operations domestically, which in turn generates broader benefits for the Singapore economy.

This article examines the impact of investments abroad on firm-level outcomes in Singapore. Our findings suggest that overseas investments by Singapore-based firms have a positive impact on their operations in Singapore (i.e., the home country). On average, an increase in a Singapore-based firm’s DIA stock leads to higher revenue, profits, value-added and employment for its operations in Singapore. In addition, our study finds that these benefits accrue to firms regardless of whether they are investing overseas for the first time or have an established presence abroad. Our findings thus support continuing efforts by the Government to encourage more Singapore firms to expand beyond the domestic market.

The views expressed in this paper are solely those of the authors and do not necessarily reflect those of the Ministry of Trade and Industry, the Department of Statistics Singapore, Enterprise Singapore or the Government of Singapore.

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