 Market Access and Technology Adoption in the Presence of FDIDiscussion papers from Research Institute of Economy, Trade and Industry (RIETI) Abstract: This paper theoretically investigates whether improved access to the domestic market increases the speed with which a foreign firm adopts new technology. In our model, foreign firms choose between exporting and foreign direct investment (FDI) in serving the domestic market. In the absence of other foreign firms, a reduction in the fixed cost of FDI promotes and accelerates technology adoption by the foreign firm, while tariff-free access to the domestic market induces the most rapid timing of technology adoption. If there is another foreign firm that has already adopted the advanced technology and both firms compete in the domestic market, a reduction in the fixed cost of FDI or the elimination of the tariff may either deter or delay the timing of technology adoption. The quickest timing of technology adoption may be attained when the fixed cost of FDI and the tariff are neither very high nor very low. These results suggest that improved access to the domestic market does not necessarily contribute to the technological upgrading of foreign firms. Pages: 36 pages Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:13040 Access Statistics for this paper More papers in Discussion papers from Research Institute of Economy, Trade and Industry (RIETI) Contact information at EDIRC. |
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