Foreign Direct Investment and the Nature of the Imitation Process
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.
|Date of creation:||01 May 2006|
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