Location of foreign direct investment in vertically related markets

Arbeitspapier

We provide an alternative explanation for the commonly observed FDI in developed countries (DCs) considering a vertically related market structure and endogenizing vertical technology transfer (VTT). We show that even though VTT is more costly in a less developed country (LDC), a multinational does not always transfer less technology there than in a DC. Moreover, we show that a multinational sometimes locates its FDI in a DC where, although downstream competition is stronger than in a LDC, it can obtain the input at better terms due to VTT. Independently of whether the host country is more or less developed, FDI is always welfare-enhancing.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 4117

Classification and Topics

• Classification: Wirtschaft ; Oligopoly and Other Imperfect Markets ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; Multinational Firms; International Business
• Subject: foreign direct investment ; host country ; vertical relations ; developed countries

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Milliou, Chrysovalantou
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/69995
• Last update: 10.03.2025, 11:44 AM CET