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Abstract

In this paper, we extend the growth model to include firm-specific technology capital and use it to assess the gains from opening to foreign direct investment. A firm's technology capital is its unique know-how from investing in research and development, brands, and organization capital. Technology capital is distinguished from other forms of capital in that a firm can use it simultaneously in multiple domestic and foreign locations. A country can exploit foreign technology capital by permitting direct investment by foreign multinationals. In both steady-state and transitional analyses, the extended growth model predicts large gains to being open.

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File URL: http://www.sciencedirect.com/science/article/B6WJ3-4V4VYFS-1/2/8696bd41e0c9e69d5db0543207514492
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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 144 (2009)
Issue (Month): 6 (November)
Pages: 2454-2476

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Handle: RePEc:eee:jetheo:v:144:y:2009:i:6:p:2454-2476

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Web page: http://www.elsevier.com/locate/inca/622869

Related research

Keywords: Openness Foreign direct investment;

Other versions of this item:

Find related papers by JEL classification:

• F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
• F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
• O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
• O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D

References

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