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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. 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.
  2. Raouf, BOUCEKKINE & Blanca, MARTINEZ & Cagri, SAGLAM, 2003. "The Development problem under embodiment," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2003006, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  3. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  4. Segerstrom, Paul S & Anant, T C A & Dinopoulos, Elias, 1990. "A Schumpeterian Model of the Product Life Cycle," American Economic Review, American Economic Association, vol. 80(5), pages 1077-91, December.
  5. Bruce A. Blonigen, 1999. "In Search of Substitution Between Foreign Production and Exports," NBER Working Papers 7154, National Bureau of Economic Research, Inc.
  6. Harry Huizinga, 1995. "Taxation and the Transfer of Technology by Multinational Firms," Canadian Journal of Economics, Canadian Economics Association, vol. 28(3), pages 648-55, August.
  7. James R. Markusen & Anthony J. Venables, 1997. "Foreign Direct Investment as a Catalyst for Industrial Development," NBER Working Papers 6241, National Bureau of Economic Research, Inc.
  8. Grossman, G.M. & Helpman, E., 1989. "Quality Ladders And Product Cycles," Papers 39-89, Tel Aviv.
  9. Amy Jocelyn Glass & Kamal Saggi, 1999. "Foreign Direct Investment and the Nature of R&D," Canadian Journal of Economics, Canadian Economics Association, vol. 32(1), pages 92-117, February.
  10. Romer, Paul, 1993. "Idea gaps and object gaps in economic development," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 543-573, December.
  11. Mansfield, Edwin & Romeo, Anthony, 1980. "Technology Transfer to Overseas Subsidiaries by U.S.-Based Firms," The Quarterly Journal of Economics, MIT Press, vol. 95(4), pages 737-50, December.
  12. Smarzynska, Beata K., 2002. "The composition of foreign direct investment and protection of intellectual property rights : evidence from transition economies," Policy Research Working Paper Series 2786, The World Bank.
  13. Papageorgiou, Chris, 2002. "Technology Adoption, Human Capital, and Growth Theory," Review of Development Economics, Wiley Blackwell, vol. 6(3), pages 351-68, October.
  14. repec:ner:tilbur:urn:nbn:nl:ui:12-155149 is not listed on IDEAS
  15. Findlay, Ronald, 1978. "Relative Backwardness, Direct Foreign Investment, and the Transfer of Technology: A Simple Dynamic Model," The Quarterly Journal of Economics, MIT Press, vol. 92(1), pages 1-16, February.
  16. Mattoo, Aaditya & Olarreaga, Marcelo & Saggi, Kamal, 2001. "Mode of Foreign Entry, Technology Transfer, and FDI Policy," CEPR Discussion Papers 2870, C.E.P.R. Discussion Papers.
  17. 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.
  18. Vishwasrao, Sharmila & Bosshardt, William, 2001. "Foreign ownership and technology adoption: evidence from Indian firms," Journal of Development Economics, Elsevier, vol. 65(2), pages 367-387, August.
  19. Grether, Jean-Marie, 1999. "Determinants of Technological Diffusion in Mexican Manufacturing: A Plant-Level Analysis," World Development, Elsevier, vol. 27(7), pages 1287-1298, July.
  20. Magnus Blomstrom & Jian-Ye Wang, 1992. "Foreign Investment and Technology Transfer: A Simple Model," NBER Working Papers 2958, National Bureau of Economic Research, Inc.
  21. Das, Sanghamitra, 1987. "Externalities, and technology transfer through multinational corporations A theoretical analysis," Journal of International Economics, Elsevier, vol. 22(1-2), pages 171-182, February.
  22. repec:dgr:kubcen:199541 is not listed on IDEAS
  23. 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.
  24. 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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