The effects of different entry modes of foreign direct investment on labor rights in the developing world

Although many studies have investigated the effects of foreign direct investment on labor rights in the developing world, no studies of which we are aware have considered how differences in the mode of entry—that is, mergers and acquisitions (M&As), cross-border joint ventures (JVs), and greenfield investments (GIs)—taken by multinational corporations affect labor rights in host countries. Using panel data for up to 113 developing countries from 1985–2002, we find that foreign firms that enter via M&As tend to have minimal, or slightly negative, effects on labor rights, whereas JVs and GIs support improvements in workers’ rights. Overall, the results suggest that the sectors and motivations associated with JV and GI modes of entry increase labor demand, improving the bargaining power of workers.