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Acquisition versus Green eld Investment versus Export in an International Oligopoly with Heterogeneous Firms

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  • Ben Ferrett

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    (School of Business and Economics, Loughborough University, UK)

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    Abstract

    Foreign-owned firms exhibit widely-documented productivity advantages over domestic firms. Building on this stylized fact, we model the relationships between FDI flows and productivity differences across firms within an international oligopoly. Industrial structure is determined endogenously, and both greenfield and acquisition-FDI are allowed for. The technology gap between firms interacts with localized spillovers to determine greenfield-FDI incentives and with within-firm technology transfer to determine the profitability of acquisition-FDI. Greenfield and acquisition-FDI also affect the profitability of entry into the industry differently. We contrast our results with the insights of Dunning’s well-known OLI framework on the causes of FDI flows.

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    File URL: http://www.lboro.ac.uk/departments/sbe/RePEc/lbo/lbowps/Ferrett_WP2012_3.pdf
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    Bibliographic Info

    Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2012_03.

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    Date of creation: Apr 2012
    Date of revision: Apr 2012
    Handle: RePEc:lbo:lbowps:2012_03

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    Postal: Loughborough, Leicestershire, LE11 3TU
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    Web page: http://www.lboro.ac.uk/departments/sbe/research/economics/index.html
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    Keywords: acquisition-FDI; greenfield-FDI; technology transfer; spillovers; foreign-owned firms’ productivity advantages;

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    1. Griffith, Rachel & Redding, Stephen J & Simpson, Helen, 2004. "Foreign Ownership and Productivity: New Evidence from the Service Sector and the R&D Lab," CEPR Discussion Papers 4691, C.E.P.R. Discussion Papers.
    2. Richard Harris & Catherine Robinson, 2003. "Foreign Ownership and Productivity in the United Kingdom Estimates for U.K. Manufacturing Using the ARD," Review of Industrial Organization, Springer, vol. 22(3), pages 207-223, May.
    3. Davies, Stephen & Lyons, Bruce, 1996. "Industrial Organization in the European Union: Structure, Strategy, and the Competitive Mechanism," OUP Catalogue, Oxford University Press, number 9780198289739, September.
    4. Damien NEVEN & George SIOTIS, 1995. "Technology Sourcing and FDI in the EC : An Empirical Evaluation," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9508, Université de Lausanne, Faculté des HEC, DEEP.
    5. Mattoo, Aaditya & Olarreaga, Marcelo & Saggi, Kamal, 2004. "Mode of foreign entry, technology transfer, and FDI policy," Journal of Development Economics, Elsevier, vol. 75(1), pages 95-111, October.
    6. Chiara Criscuolo & Ralf Martin, 2005. "Multinationals and US Productivity Leadership: Evidence from Great Britain," CEP Discussion Papers dp0672, Centre for Economic Performance, LSE.
    7. Robert E. Baldwin & Robert E. Lipsey & J. David Richards, 1998. "Geography and Ownership as Bases for Economic Accounting," NBER Books, National Bureau of Economic Research, Inc, number bald98-1, octubre-d.
    8. Bruno Van Pottelsberghe & Frank Lichtenberg, 2001. "Does foreign direct investment transfer technology across borders?," ULB Institutional Repository 2013/6221, ULB -- Universite Libre de Bruxelles.
    9. Petit, Maria-Luisa & Sanna-Randaccio, Francesca, 2000. "Endogenous R&D and foreign direct investment in international oligopolies," International Journal of Industrial Organization, Elsevier, vol. 18(2), pages 339-367, February.
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