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The Impact of Foreign Direct Investment on Home and Host Countries with Endogenous R&D

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  • Sanna-Randaccio, Francesca

Abstract

he paper analyzes the impact of FDI on home and host countries, when firms compete both in the choice of international strategy and in R&D. A two-country, two-firm model is used. The problem is structured as a three-stage game in which firms must decide: the mode of foreign expansion; how much to invest in R&D; how much to sell in each market. It is shown that in high-technology sectors a policy of attracting inward FDI may increase welfare in both the home and host countries. The effect on host-country welfare is found to be more beneficial if technological spillovers are national, instead of international, in scope. Copyright 2002 by Blackwell Publishing Ltd.

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  • Sanna-Randaccio, Francesca, 2002. "The Impact of Foreign Direct Investment on Home and Host Countries with Endogenous R&D," Review of International Economics, Wiley Blackwell, vol. 10(2), pages 278-298, May.
  • Handle: RePEc:bla:reviec:v:10:y:2002:i:2:p:278-98
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