Foreign Direct Investment

Tain-jy Chen and Yi-Ping Chen

Industry and Innovation, 1995, vol. 2, issue 1, 57-68

Abstract: Whether foreign direct investment will lead to deindustrialisation at home depends on the investing country's capability to restructure itself on the intra-firm, intra-industry, and intersectoral levels. This paper divides FDI into defensive and expansionary types and argues that defensive FDI is an indication of deteriorating comparative advantage at home. The industry in which defensive FDI prevails lacks the capacity for restructuring. Data from Taiwan show that domestic production declines in an industry when defensive FDI dominates expansionary FDI in that industry.

Date: 1995
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DOI: 10.1080/13662719500000004

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