Technology Gap, Foreign Direct Investment, and Market Structure
We develop and analyze an entry model that predicts that the likelihood that foreign firms enter a country increases with the productivity gap between foreign and domestic firms. The intuition is that foreign firms locate where their competitive advantage is highest and thus enter countries where their productivity is higher relative to domestic firms. We test this model using firm level data on acquisitions of British firms by foreign firms and find results that are consistent with our model’s predictions.
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- Chiara Criscuolo & Ralf Martin, 2009. "Multinationals and U.S. Productivity Leadership: Evidence from Great Britain," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 263-281, May.
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- Glass, Amy Jocelyn, 1997. "Product Cycles and Market Penetration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(4), pages 865-91, November.
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