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Foreign Direct Investment and the Nature of the Imitation Process

  • Helene, LATZER

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)

We study the optimal imitation strategy of a developing country having access to both imitation through trade and imitation through Foreign Direct Investments (FDIs). We base ourselves on an extension of the Romer ‘variety model’ (1990) of technology-driven growth, and find that the two types of imitation are substitutes and not complements. We characterize a condition on the technology level transferred by multinational foreign firms for imitation through FDI to be optimal, and study the effect of a technological acceleration.

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Paper provided by Université catholique de Louvain, Département des Sciences Economiques in its series Discussion Papers (ECON - Département des Sciences Economiques) with number 2006012.

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Length: 30
Date of creation: 01 May 2006
Date of revision:
Handle: RePEc:ctl:louvec:2006012
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  1. Aitken, Brian & Harrison, Ann & DEC, 1994. "Do domestic firms benefit from foreign direct investment? Evidence from panel data," Policy Research Working Paper Series 1248, The World Bank.
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  17. Romer, Paul, 1993. "Idea gaps and object gaps in economic development," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 543-573, December.
  18. Theo Eicher & Jong Woo Kang, 2004. "Trade, Foreign Direct Investment or Acquisition: Optimal Entry Modes for Multinationals," CESifo Working Paper Series 1174, CESifo Group Munich.
  19. Richard R. Nelson & Edmond S. Phelps, 1965. "Investment in Humans, Technological Diffusion and Economic Growth," Cowles Foundation Discussion Papers 189, Cowles Foundation for Research in Economics, Yale University.
  20. Blomstrom, Magnus & Persson, Hakan, 1983. "Foreign investment and spillover efficiency in an underdeveloped economy: Evidence from the Mexican manufacturing industry," World Development, Elsevier, vol. 11(6), pages 493-501, June.
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