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

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  • Lorenzo Casaburi
  • Valeria Gattai

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Abstract

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.

Suggested Citation

  • Lorenzo Casaburi & Valeria Gattai, 2009. "Why FDI? An Empirical Assessment Based on Contractual Incompleteness and Dissipation of Intangible Assets," Working Papers 164, University of Milano-Bicocca, Department of Economics, revised Jul 2009.
  • Handle: RePEc:mib:wpaper:164
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    Cited by:

    1. Patrik Tingvall & Andreas Poldahl, 2012. "Determinants of Firm R&D: The Role of Relationship-Specific Interactions for R&D Spillovers," Journal of Industry, Competition and Trade, Springer, vol. 12(4), pages 395-411, December.
    2. Westerberg, Hans Seerar, 2014. "The Return to R&D and Seller-buyer Interactions: A Quantile Regression Approach," Ratio Working Papers 231, The Ratio Institute.
    3. Heyman Fredrik & Tingvall Patrik Gustavsson, 2015. "The Dynamics of Offshoring and Institutions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(4), pages 1975-2016, October.

    More about this item

    Keywords

    R&D; Entry; Endogenous market structures; Leadership;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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