FDI spillovers, New Industry Development, and Economic Growth

Thanh Tam Nguyen-Huu () and Ngoc‐Sang Pham
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Thanh Tam Nguyen-Huu: Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School

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Abstract: The paper investigates the optimal strategy of a small open economy receiving FDI in an optimal growth context. We prove that no domestic firm can enter the new industry when the multinational enterprise's productivity or the fixed entry cost is high. Nevertheless, the host country's investment stock converges to a higher steady state than an economy without FDI. A domestic firm enters the new industry if its productivity is high enough. Moreover, the domestic firm can dominate or even eliminate its foreign counterpart.

Keywords: Optimal growth; FDI spillovers; TFP; Fixed cost (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-fdg, nep-int and nep-sbm
Note: View the original document on HAL open archive server: https://hal.science/hal-04240260v1
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Citations: View citations in EconPapers (2)

Published in Journal of Public Economic Theory, 2024, 26 (1), pp.e12670. ⟨10.1111/jpet.12670⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04240260

DOI: 10.1111/jpet.12670

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