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Foreign Direct Investment with Endogenous Technology Choice

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  • Herbert Dawid
  • Benteng Zou

Abstract

In this paper, we analyze optimal foreign direct investment of a firm which operates in a duopolistic market. We characterize a technology spillover threshold and show that for an intensity of spillovers below this threshold, there is a unique locally asymptotic stable steady state with a positive capital stock in the developing country. Furthermore, we characterize how optimal foreign investment patterns and the investor’s value function depend on the level of technology transferred and characterize the optimal level to be used for the foreign direct investment.
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  • Herbert Dawid & Benteng Zou, 2017. "Foreign Direct Investment with Endogenous Technology Choice," Pacific Economic Review, Wiley Blackwell, vol. 22(1), pages 3-22, February.
    • Handle: RePEc:bla:pacecr:v:22:y:2017:i:1:p:3-22
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    File URL: http://hdl.handle.net/10.1111/1468-0106.12202
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    More about this item

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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