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Relationship between FDI, foreign ownership restrictions, and technology transfer in the resources sector: A derivation approach

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  • Ghebrihiwet, Nahom
  • Motchenkova, Evgenia

Abstract

In various industries, multinational companies are the dominant players while local firms play a less prominent role. We consider such an industry and develop a model in which foreign multinationals strategically interact in technology transfer and compete in the product market stage. Furthermore, we analyze the welfare implications of often observed FDI policy measures. We find that the cost of technology transfer provides a possible rationale for why in practice FDI crowding out effects are often smaller in less developed countries.We also find that foreign ownership restrictions may reduce FDI crowding-out effects. However, the net effect of these restrictions on host country welfare will be negative. Finally, we find that, in industries with low levels of product market competition (e.g. the natural resources sector), the government may improve welfare by taking away the joint venture equity share of the domestic firm.

Suggested Citation

  • Ghebrihiwet, Nahom & Motchenkova, Evgenia, 2017. "Relationship between FDI, foreign ownership restrictions, and technology transfer in the resources sector: A derivation approach," Resources Policy, Elsevier, vol. 52(C), pages 320-326.
    • Handle: RePEc:eee:jrpoli:v:52:y:2017:i:c:p:320-326
    DOI: 10.1016/j.resourpol.2017.03.011
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    More about this item

    Keywords

    FDI; Multinational firms; Technology transfer; FDI crowding-out effects; Joint ventures; Natural resources sector;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q37 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Issues in International Trade

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