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Foreign Direct Investment Strategies and Firms' Capabilities


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  • Georges SIOTIS


This paper presents a simple model to analyse the impact of localised externalities on the internationalisation decision of firms. We argue that, once localised spillovers are taken into account, the standard predictions on the nature and direction of foreign direct investment (FDI) flows may bereversed. In the context of this model, the firm engaging in FDI does not necessarily enjoy a superior capability and the presence of spillovers ma y induce a firm to invest abroad even in the absence of exporting costs inorder to capture spatially bounded externalities. Conversely, firm's may refrain from investing abroad for fear of dissipation of their firm specific assets.

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Bibliographic Info

Paper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 9626.

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Length: 31 pages
Date of creation: Oct 1996
Date of revision:
Publication status: Published in Journal of Economics & Management Strategy, vol. 8 (2), Summer 1999, pp. 251-270
Handle: RePEc:lau:crdeep:9626

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Postal: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
Phone: ++41 21 692.33.64
Fax: ++41 21 692.33.05
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Keywords: foreign direct investment; multinational firms; duopoly; technology sourcing;

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