Location of Foreign Direct Investment in Vertically Related Markets
Chrysovalantou Milliou ()
No 4117, CESifo Working Paper Series from CESifo
We provide an alternative explanation for the commonly observed FDI in developed countries (DCs) considering a vertically related market structure and endogenizing vertical technology transfer (VTT). We show that even though VTT is more costly in a less developed country (LDC), a multinational does not always transfer less technology there than in a DC. Moreover, we show that a multinational sometimes locates its FDI in a DC where, although downstream competition is stronger than in a LDC, it can obtain the input at better terms due to VTT. Independently of whether the host country is more or less developed, FDI is always welfare-enhancing.
Keywords: foreign direct investment; host country; vertical relations; developed countries (search for similar items in EconPapers)
JEL-codes: L13 F12 F23 (search for similar items in EconPapers)
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Journal Article: Location for Foreign Direct Investment in Vertically Related Markets (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_4117
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