Why FDI? An Empirical Assessment Based on Contractual Incompleteness and Dissipation of Intangible Assets

Lorenzo Casaburi and Valeria Gattai

No 164, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: This paper makes an empirical assessment of Foreign Direct Investment (FDI), by analysing the boundaries of a large sample of Italian Multinational Enterprises (MNEs). Firm level data from the eighth and the ninth Capitalia Surveys on Manufacturing Firms, AIDA and Centrale dei Bilanci is gathered in a comprehensive dataset that accounts for more than 8000 observations. In line with the Dissipation of Intangible Assets explanation of Foreign Direct Investment, our estimates show that MNEs endowed with superior technology and better human capital tend to operate abroad via FDI, to avoid knowledge spillover. By contrast, we do not find strong support to the Contractual Incompleteness hypothesis: indeed there quite a weak correlation between the degree of contractual incompleteness, at the industry level, and the likelihood of Foreign Direct Investment by Italian enterprises.

Keywords: R&D; Entry; Endogenous market structures; Leadership (search for similar items in EconPapers)
JEL-codes: C25 F23 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2009-07, Revised 2009-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:mib:wpaper:164

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