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Foreign direct investment in duopoly: When is it optimal to invest abroad?

Author

Listed:
  • Hebert Dawid

    (Department of Business Administration and Economics and Institute of Mathematical Economics, Bielefeld University)

  • Benteng Zou

    (CREA, Université du Luxembourg)

Abstract

In this paper, we analyze optimal foreign direct investment of a firm which operates in a duopolistic market. We characterize certain technology spillover threshold and show that for a speed of transfer below this threshold, there is a unique locally asymptotic stable steady state with a positive capital stock in the developing country. Furthermore, this threshold exposes what level of technology should take as foreign direct investment.

Suggested Citation

  • Hebert Dawid & Benteng Zou, 2014. "Foreign direct investment in duopoly: When is it optimal to invest abroad?," DEM Discussion Paper Series 14-23, Department of Economics at the University of Luxembourg.
    • Handle: RePEc:luc:wpaper:14-23
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    File URL: https://hdl.handle.net/10993/19679
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    References listed on IDEAS

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    More about this item

    Keywords

    foreign direct investment; technology spillovers; optimal control;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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