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Why FDI? An Empirical Assessment Based on Contractual Incompleteness and Dissipation of Intangible Assets

  • Lorenzo Casaburi
  • Valeria Gattai

    ()

This paper makes an empirical assessment of Foreign Direct Investment (FDI), by analysing the boundaries of a large sample of Italian Multinational Enterprises (MNEs). Firm level data from the eighth and the ninth Capitalia Surveys on Manufacturing Firms, AIDA and Centrale dei Bilanci is gathered in a comprehensive dataset that accounts for more than 8000 observations. In line with the Dissipation of Intangible Assets explanation of Foreign Direct Investment, our estimates show that MNEs endowed with superior technology and better human capital tend to operate abroad via FDI, to avoid knowledge spillover. By contrast, we do not find strong support to the Contractual Incompleteness hypothesis: indeed there quite a weak correlation between the degree of contractual incompleteness, at the industry level, and the likelihood of Foreign Direct Investment by Italian enterprises.

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File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper164.pdf
File Function: First version, 2009
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Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 164.

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Length: 32 pages
Date of creation: Jul 2009
Date of revision: Jul 2009
Handle: RePEc:mib:wpaper:164
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