State Characteristics and Economic Internationalization

The American states differ widely in their economic characteristics and capabilities and their international orientation (“outward look”), which, in combination, may affect their relative competitiveness and performance in international economic activities. The present paper focused on state characteristics associated with two important elements of state economic internationalization: inward foreign direct investment and export intensity. Multivariate analyses identified two state characteristics that are significantly related to both elements of economic internationalization: lower levels of unionization and state spending targeted for promoting international economic activities (e.g. trade development, export promotion, inward/outward foreign direct investment). On the other hand, different sets of other state characteristics were found to be associated with high performance on the two selected elements of internationalization: lower state and local taxes, better interstate and airport infrastructure capabilities and higher consumer buying power were associated with higher inward foreign direct investment, while higher patent registrations, extensive water transportation capabilities, higher hourly wages and higher state and local taxes were associated with higher export intensity of the states. Further research is underway to examine the consistency of the findings for specific groups of industries and trading partner countries.