Acquisition versus Green eld Investment versus Export in an International Oligopoly with Heterogeneous Firms

Ben Ferrett

Discussion Paper Series from Department of Economics, Loughborough University

Abstract: Foreign-owned firms exhibit widely-documented productivity advantages over domestic firms. Building on this stylized fact, we model the relationships between FDI flows and productivity differences across firms within an international oligopoly. Industrial structure is determined endogenously, and both greenfield and acquisition-FDI are allowed for. The technology gap between firms interacts with localized spillovers to determine greenfield-FDI incentives and with within-firm technology transfer to determine the profitability of acquisition-FDI. Greenfield and acquisition-FDI also affect the profitability of entry into the industry differently. We contrast our results with the insights of Dunning’s well-known OLI framework on the causes of FDI flows.

Keywords: acquisition-FDI; greenfield-FDI; technology transfer; spillovers; foreign-owned firms’ productivity advantages (search for similar items in EconPapers)
JEL-codes: F23 L13 O33 (search for similar items in EconPapers)
Date: 2012-04, Revised 2012-04
New Economics Papers: this item is included in nep-bec
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