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Competition for foreign direct investment: The role of technology and market structure

  • Hao, Qian
  • Lahiri, Sajal

We analyze the location choice of a multinational corporation (MNC) between two host countries. We consider both passive and active governments and examine the role of production efficiencies, and of market structure, in the MNC's choice. Our findings include: (i) when the domestic firms export, the country with fewer firms always gets the MNC, but the MNC is indifferent between hosts with firms that have different efficiency levels, (ii) when the domestic firms do not export, the country with more firms gets the MNC if they are sufficiently inefficient, and the MNC locates in the country with less efficient firms.

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Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 18 (2009)
Issue (Month): 4 (October)
Pages: 680-690

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Handle: RePEc:eee:reveco:v:18:y:2009:i:4:p:680-690
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620165

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  18. Bjorvatn, Kjetil & Eckel, Carsten, 2006. "Policy competition for foreign direct investment between asymmetric countries," European Economic Review, Elsevier, vol. 50(7), pages 1891-1907, October.
  19. Fumagalli, Chiara, 2003. "On the welfare effects of competition for foreign direct investments," European Economic Review, Elsevier, vol. 47(6), pages 963-983, December.
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