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...

According to conventional wisdom, multinational firms undertake vertical FDI in order to take advantage of cross-border factor cost differences and source the inputs from abroad at better terms. Recent empirical findings though document that this is not always the case. We provide theoretical...

This paper proposes a proximity-concentration tradeoff in product space as a determinant of horizontal foreign direct investment (FDI). Firms that enter a foreign market by exporting are able to capture consumer surplus from introducing a differentiated product with characteristics that the...

We derive the sub-game perfect Nash equilibria for the foreign direct investment (FDI) game played between two unionised firms. Among other results, we show that FDI is less likely, ceteris paribus, the greater is union bargaining power, the stronger the weight the union attaches to wages, and...

Recent evidences show the co-existence of lower trade cost and higher amount of foreign direct investment (FDI), which cannot be explained by the traditional "proximity-concentration trade-off". We show that if both the home and the host country markets are important to the foreign firm, lower...

The issue of economic governance is highly discussed pertaining to the question of industrialisation of a country, but the literature on trade and foreign direct investment (FDI) hardly pays attention to this aspect. We develop a simple model to show how better governance affects inward FDI and...

The important characteristic of international competition between developed and less developed countries is vertical product differentiation, where firms' quality choices represent strategic decisions. Unlike the previous literature, we allow for a leadership in quality choice and the...

This study investigated the current situation of the Philippine economy concerning Foreign Direct Investments (FDIs). Barriers to foreign direct investment (FDI) in the Philippines are highly restrictive. The Foreign Investment Act (R.A. 7042, 1991, amended by R.A. 8179, 1996) states that at...

When Northern firms undertake FDI in the South, the superior technology they bring to their Southern operations spills over to Southern firms. Technology spillovers accompanied by FDI often enable Southern firms to enhance their product quality. This paper explores a model that incorporates...

This paper studies the impact of trade liberalization in terms of tarif cuts within the Eastern European enlargement on German and Austrian firm productivity. Unique matching of data from 1994 to 2003 suggests that tarif reductions raise parent firm productivity significantly. A ten percentage...