Hunting High and Low for Vertical FDI

Ronald Davies ()

University of Oregon Economics Department Working Papers from University of Oregon Economics Department

Abstract: Recently the two dominant models of foreign direct investment (FDI), the horizontal and vertical models, have been synthesized into the knowledge capital (KK) model. Empirical tests, however, have found that the horizontal model cannot be rejected in favor of the KK model. This paper suggests that this is because the empirical specifications used do not allow the vertical aspects of FDI to manifest themselves. By extending the specification, I find evidence of vertical FDI. In particular, when I use the stock of FDI as my measure of FDI activity I can reject the horizontal model in favor of the KK model and identify countries for which FDI is dominated by vertical investment.

Keywords: Foreign Direct Investment; Vertical Investment; Horizontal Investment; Knowledge Capital. (search for similar items in EconPapers)
JEL-codes: F13 F23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn
Date: 2002-08-01, Revised 2002-08-01
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Related works:
Journal Article: Hunting High and Low for Vertical FDI (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:ore:uoecwp:2002-12

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