Business Research

Crossing Borders Inspires Economic Research

by Franci Rogers

While on a Fulbright Scholarship in Vietnam, Van Pham, associate professor of Economics, noticed something in the country that was counter to the way most researchers think of foreign direct investment and growth.

"Theory tells us that foreign direct investment (FDI) has potential benefits to both investing and host countries," Pham said.

Benefits for a company from a wealthier country include finding a cheap source of labor, a supply of natural resources and workers with specialized skills.

"Developing countries can benefit beyond employment for its citizens and export earnings," Pham said. "Through FDI, technology and management techniques would be passed along. These knowledge gains are crucial for sustaining economic growth."

But during his year at the University of Economics in Ho Chi Minh City, this is not what he saw. "Living in Vietnam, it didn't seem like that was happening," he said. "In fact, there seemed to be a negative relationship between FDI and technology transfer across provinces."

This led Pham and his colleagues at the University of Economics, Quan Minh Quoc Binh and Nguyen Trong Hoai, to study how different types of FDI affect technology transfer.

Their research, which they hope to publish soon, led them to the conclusion that some FDI is more conducive to technology transfer and others are less so.

"Natural resource extraction doesn't do much for technology transfer," he said. "There are some immediate benefits, but little long-term positive effect."

In 2011, Pham was named a Mayo McBride Global Scholar, which grants faculty members a sabbatical to engage in international research. Pham, along with his colleagues in Vietnam, worked on the statistical analysis of the FDI research over this past summer. Having studied the issue on a cross-country and cross-province level, he now wants to continue researching it at the firm level.

"This is important work, and I'm thankful I was able to spend time living and working in Vietnam because it gave me an appreciation of the problems and issues in developing countries," he said. "Without having lived there and witnessing some of it, I would have thought all FDI was the same, but it's not. With the perspective of my local colleagues, we were able to identify issues beneath the surface and beyond the numbers."

Experiences abroad have long shaped Pham's research, and the focus of nearly everything he studies is the interaction between the U.S. economy and foreign economies, especially developing countries.

He recently published two papers that investigated American retail "big box" stores and their relationship with importers: "Imports R Us" (American Economic Review, 2010), which studies the relationships between U.S. retailers and the growth of imports from developing countries, and "Super Size It" (Journal of Economics and Management Strategy, 2012), which explains the size of the retail chain, the size of the stores and the relationship to trade.

Pham has also studied immigration. In 2010, the Cardozo Law Review published his paper that assessed the impact of more restrictive immigration laws at the county and city level. He and Texas Wesleyan School of Law colleague Huyen Pham found that more restrictive laws had a negative impact on those communities. Both authorized and unauthorized workers saw job losses and reductions in pay where laws were more restrictive, and costs for business owners increased.

This research led the two to develop a scale to measure the climate for immigrants on a state-by-state basis, giving each state a score based on the laws and other factors. That paper was published in 2012 by New York University Press in the book titled Illegals in the Backyard: State and Local Regulation of Immigration Policy.

Pham is continuing his global economics research, and is currently working on a paper with a former Baylor graduate student, Cristin Hulyk, exploring the relationship between language and service trade.

"Much of the previous research into trade between countries has focused on physical distance and commodities trade," Pham said. "But services are becoming a much bigger component of world trade. Service exports, like call centers in the Philippines and India, play an increasingly crucial role in the growth of developing countries."

Pham and Hulyk hypothesized that language distance, not physical distance, between countries is key to trade in services.

"We found that the lower the linguistic distance, the more service trade. And the closer a language is to English, the more services the country exports."

With the measure developed in the paper, Pham will next study how language distance affects cross-border investments.

"This issue of language and trade has implications for Americans as well as the developing countries," he said. "Not just as consumers, but as exporters and investors."

Van Pham
Baylor University