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Acquisition versus Green eld Investment versus Export in an International Oligopoly with Heterogeneous Firms

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  • Ben Ferrett

    (School of Business and Economics, Loughborough University, UK)

Abstract

Foreign-owned firms exhibit widely-documented productivity advantages over domestic firms. Building on this stylized fact, we model the relationships between FDI flows and productivity differences across firms within an international oligopoly. Industrial structure is determined endogenously, and both greenfield and acquisition-FDI are allowed for. The technology gap between firms interacts with localized spillovers to determine greenfield-FDI incentives and with within-firm technology transfer to determine the profitability of acquisition-FDI. Greenfield and acquisition-FDI also affect the profitability of entry into the industry differently. We contrast our results with the insights of Dunning’s well-known OLI framework on the causes of FDI flows.

Suggested Citation

  • Ben Ferrett, 2012. "Acquisition versus Green eld Investment versus Export in an International Oligopoly with Heterogeneous Firms," Discussion Paper Series 2012_03, Department of Economics, Loughborough University, revised Apr 2012.
    • Handle: RePEc:lbo:lbowps:2012_03
    as

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    File URL: http://www.lboro.ac.uk/departments/sbe/RePEc/lbo/lbowps/Ferrett_WP2012_3.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    acquisition-FDI; greenfield-FDI; technology transfer; spillovers; foreign-owned firms’ productivity advantages;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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