Risk and the Technology Content of FDI:A Dynamic Model

Pao-Li Chang () and Chia-Hui Lu

No 07-2011, Working Papers from Singapore Management University, School of Economics

Abstract: This paper incorporates risk into the FDI decisions of rms. The risk of FDI failure increases with the gap between the South's technology frontier and the technology complexity of a firm's product. This leads to a double-crossing sorting pattern of FDI firms of intermediate technology levels are more likely than others to undertake FDI. It is with the attempt to relax the upper bound of the technology content of FDI, we argue, that many FDI policies are created. The theory's predictions are consistent with the empirical pattern of FDI in China by US and Taiwanese manufacturing rms.

Keywords: Foreign Direct Investment; Technology; Risk; spillover; Dynamic (search for similar items in EconPapers)
JEL-codes: F21 F23 O24 O33 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2011-08
New Economics Papers: this item is included in nep-sea and nep-tra
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Citations: View citations in EconPapers (2)

Published in SMU Economics and Statistics Working Paper Series

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Journal Article: Risk and the technology content of FDI: A dynamic model (2012)
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