Economic output is the quantity of a product that a company, sector, or economy can produce over a limited period of time.[i] In this report, economic output is considered to be the total value of all goods and services produced in an economy.
FOREIGN DIRECT INVESTMENT (FDI)
FDI is an investment made to acquire lasting interest in enterprises operating outside of the economy of the investor. The investor´s purpose is to gain an effective voice in the management of the enterprise. The foreign entity or group of associated entities that makes the investment is termed the “direct investor”. The unincorporated or incorporated enterprise-a branch or subsidiary, respectively, in which direct investment is made-is referred to as a “direct investment enterprise”. Some degree of equity ownership is almost always considered to be associated with an effective voice in the management of an enterprise; a threshold of 10 per cent of equity ownership qualifies an investor as a foreign direct investor.[ii] In this report, FDI is defined as investments of companies from outside the US into firms operating in New Hampshire.
FOREIGN PARENT COMPANY
A parent company is a company that controls other, smaller businesses by owning an influential amount of voting stock or control.[iii]
A foreign subsidiary is a partially or wholly owned company that is part of a larger corporation with headquarters in another country.[iv] When the subsidiary operates in a different country, it is called a foreign subsidiary.[v] In this report, foreign subsidiaries are signified to be firms that are part of companies with headquarters in a country other than US. For readability, this report uses the terms “foreign subsidiaries” and “foreign firms” interchangeably. “Firms” are used to signify the same, as understood in the context of the study.
A multinational company is a company with subsidiaries or manufacturing bases in several countries.[vi]
Research and development (R&D) refers to the investigative activities a business conducts to improve existing products and procedures or to lead to the development of new products and procedures.[vii]
A supply chain is a network between a company and its suppliers to produce and distribute a specific product. The supply chain represents the steps it takes to get the product or service to the customer.[viii] The supply chain comprises the flow of all information, products, materials and funds between the different stages of creating and selling a product. The supply chain includes all functions involved in receiving and filling a customer request. These functions include product development, marketing, operations, distribution, finance and customer service.[ix]
THE NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM (NAICS)
The North American Industry Classification System (NAICS) is the standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy.[x]
THE NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM (NAICS) CODES
The NAICS industry codes define establishments based on the activities in which they are primarily engaged. NAICS codes are also used for administrative, contracting, and tax purposes. NAICS is production oriented (not product oriented) and categorizes businesses with others that have similar methods of production.[xi] NAICS is a 2- through 6-digit hierarchical classification system, offering five levels of detail. Each digit in the code is part of a series of progressively narrower categories, and the more digits in the code signify greater classification detail. The first two digits designate the economic sector, the third digit designates the subsector, the fourth digit designates the industry group, the fifth digit designates the NAICS industry, and the sixth digit designates the national industry.[xii] This study uses 2, 3, 4 and 6-digit NAICS codes.
VALUE CHAIN ACTIVITY
Value chain activities are interlinked value-adding activities that convert inputs into outputs which, in turn, add to the bottom line and help create competitive advantage for a company.[xiii] Primary activities create the product or service, deliver and market it, and provide after-sale support. The categories of primary activities are inbound logistics, operations, outbound logistics, marketing and sales, and service. Support activities provide the input and infrastructure that allow the primary activities to take place. The categories are company infrastructure, human resource management, technology development, and procurement.[xiv] The study takes a general view on value chain and uses the main value chain activity to categorize foreign subsidiaries as producers, distributors or service providers.
[i] Definition quoted from https://financial-dictionary.thefreedictionary.com/Output+(economics)
[ii] Definitions of FDI are contained in the Balance of Payments Manual: Fifth Edition (BPM5) (Washington, D.C., International Monetary Fund, 1993) and the Detailed Benchmark Definition of Foreign Direct Investment: Third Edition (BD3) (Paris, Organisation for Economic Co-operation and Development, 1996). The definition in this report is extracted from http://unctad.org/en/Pages/DIAE/Foreign-Direct-Investment-(FDI).aspx.
[iii] Definition from https://www.investopedia.com/terms/p/parentcompany.asp
[iv]Definition quoted from http://www.businessdictionary.com/definition/foreign-subsidiary-company.html
[v] Excerpts from https://stats.oecd.org/glossary/detail.asp?ID=3315
[vi] Definition from http://lexicon.ft.com/Term?term=multinational-company
[viii] Adapted from https://www.investopedia.com/terms/s/supplychain.asp.
[xii] Description from https://www.census.gov/eos/www/naics/faqs/faqs.html#q5
[xiv] Quote from Porter, M. E. (1989). From competitive advantage to corporate strategy. In Readings in strategic management (pp. 234-255). Palgrave, London. Available at http://people.tamu.edu/~v-buenger/466/Comp_Adv_to_corp_strat.pdf