Entry into a Foreign Market: Foreign Direct Investment versus Licensing

Kamal Saggi ()

Review of International Economics, 1996, vol. 4, issue 1, 99-104

Abstract: We compare foreign direct investment (FDI) and technology licensing as two modes of entry into a foreign market. While direct entry via FDI dissipates rents in the host country, opportunistic competition from a license may erode rents in the entrant's other markets. Since FDI increases competition in the host country while licensing stifles it, welfare is higher under FDI than under licensing. Copyright 1996 by Blackwell Publishing Ltd.

Date: 1996
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