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Mode of foreign entry, technology transfer, and foreign direct investment policy

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Author Info

  • Mattoo, Aaditya
  • Olarreaga, Marcelo
  • Saggi, Kamal

Abstract

Foreign direct investment can take place through the direct entry of foreign firms or the acquisition of existing domestic firms. Mattoo, Olarreaga, and Saggi examine the preferences of a foreign firm and the host country government with respect to these two modes of foreign direct investment in the presence of costly technology transfer. The tradeoff between technology transfer and market competition emerges as a key determinant of preferences. The authors identify the circumstances in which the choices of the government and the foreign firm diverge-and in which domestic welfare can be improved by restrictions on foreign direct investment that induce the foreign firm to choose the socially preferred mode of entry.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2737.

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Date of creation: 31 Dec 2001
Date of revision:
Handle: RePEc:wbk:wbrwps:2737

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Related research

Keywords: ICT Policy and Strategies; General Technology; Knowledge Economy; Environmental Economics&Policies; Agricultural Research; ICT Policy and Strategies; General Technology; Poverty and Trade; Foreign Direct Investment; Trade and Regional Integration;

References

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  1. Svejnar, Jan & Smith, Stephen C, 1984. "The Economics of Joint Ventures in Less Developed Countries," The Quarterly Journal of Economics, MIT Press, vol. 99(1), pages 149-67, February.
  2. Morton I. Kamien & Israel Zang, 1988. "The Limits of Monopolization Through Acquisition," Discussion Papers 802, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Markusen, James R., 2001. "Contracts, intellectual property rights, and multinational investment in developing countries," Journal of International Economics, Elsevier, vol. 53(1), pages 189-204, February.
  4. Wilfred J. Ethier & James R. Markusen, 1991. "Multinational Firms, Technology Diffusion and Trade," NBER Working Papers 3825, National Bureau of Economic Research, Inc.
  5. Salant, Stephen W & Switzer, Sheldon & Reynolds, Robert J, 1983. "Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 185-99, May.
  6. James A. Brander & Barbara J. Spencer, 1983. "Strategic Commitment with R&D: The Symmetric Case," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 225-235, Spring.
  7. Marjit, Sugata & Broll, Udo & Mallick, Indrajit, 1995. "A theory of overseas joint ventures," Economics Letters, Elsevier, vol. 47(3-4), pages 367-370, March.
  8. Saggi, Kamal, 1996. "Entry into a Foreign Market: Foreign Direct Investment versus Licensing," Review of International Economics, Wiley Blackwell, vol. 4(1), pages 99-104, February.
  9. Al-Saadon, Yousef & Das, Satya P., 1996. "Host-country policy, transfer pricing and ownership distribution in international joint ventures: A theoretical analysis," International Journal of Industrial Organization, Elsevier, vol. 14(3), pages 345-364, May.
  10. Campbell, H. F. & Hand, A. J., 1998. "Joint ventures and technology transfer: the Solomon Islands pole-and-line fishery," Journal of Development Economics, Elsevier, vol. 57(2), pages 421-442.
  11. Kabiraj, Tarun & Roy, Prithvijit, 1999. "Technology Transfer, Merger and Joint Venture: A Comparative Welfare Analysis," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 14, pages 442-466.
  12. Saggi, Kamal, 1999. "Foreign Direct Investment, Licensing, and Incentives for Innovation," Review of International Economics, Wiley Blackwell, vol. 7(4), pages 699-714, November.
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Citations

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Cited by:
  1. Lorenzo Casaburi & Valeria Gattai, 2009. "Why FDI? An Empirical Assessment Based on Contractual Incompleteness and Dissipation of Intangible Assets," Working Papers 164, University of Milano-Bicocca, Department of Economics, revised Jul 2009.
  2. Ayse Kaya & James T. Walker, 2009. "Individual Attitudes towards the Impact of Multinational Enterprises on Local Businesses," Economics & Management Discussion Papers em-dp2009-02, Henley Business School, Reading University.
  3. Onur Koska, 2009. "Foreign Direct Investment For Sale," Working Papers 0910, University of Otago, Department of Economics, revised Oct 2009.
  4. Valeria Gattai & Corrado Molteni, 2007. "Dissipation of Knowledge and the Boundaries of the Multinational Enterprise," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 143(1), pages 1-26, April.
  5. Valeria Gattai, 2010. "Firm's intangible assets and multinational activity: Full versus shared ownership," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 19(4), pages 553-589.

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