This study aims to investigate the factors driving the foreign direct investment (FDI) decisions of coffee roasting and grinding multinational corporations (MNCs) and to examine how these strategic motivations influence the functional upgrading of host countries within the coffee global value chain (GVC).
Using panel data from 82 countries between 2010 and 2019, this study employs random effects panel models and probit models to analyze factors influencing the establishment of MNC subsidiaries in host countries.
The results indicate a positive association between market size and the likelihood of a host country attracting coffee roasting and grinding MNC subsidiaries. While an initial negative association with roasted coffee export market share is observed, this association becomes positive in the longer term. These findings suggest that coffee roasting and grinding MNC predominantly pursue market-seeking strategies. Although FDI is initially associated with lower export market shares, long-term integration may contribute to improved participation of host countries in the coffee GVC.
The analysis relies on firm-level data aggregated at the country level and proxy variables, which may not fully capture all dimensions of FDI decisions and upgrading dynamics.
This study provides empirical evidence on market-seeking strategies in the coffee GVC and links them to host-country upgrading outcomes.
