Vertical Foreign Direct Investment: Make, Sell and (Not) Buy

Arbeitspapier

According to conventional wisdom, multinational firms undertake vertical FDI in order to take advantage of cross-border factor cost differences and source the inputs from abroad at better terms. Recent empirical findings though document that this is not always the case. We provide theoretical support to the latter by demonstrating that when there is transfer of intangible assets between a multinational’s vertically related production plants, its parent firm can engage in vertical FDI in order to improve its cross-threat and its input sourcing terms domestically and not abroad as well as in order to exploit its intangible assets in another country. We also investigate the effects of trade liberalization and the welfare consequences of vertical FDI.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 6190

Classification and Topics

• Classification: Wirtschaft ; Oligopoly and Other Imperfect Markets ; Firm Organization and Market Structure ; Organization of Production ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; Multinational Firms; International Business
• Subject: international trade ; vertical FDI ; inputs ; trade liberalization ; intangible assets ; two-part tariffs

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Milliou, Chrysovalantou ; Sandonís, Joel
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/149277
• Last update: 10.03.2025, 11:42 AM CET