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Endogenous FDI Spillovers from Japan to Russia and China with Spillover-Prevention Costs

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  • Kiyoshi Matsubara

Abstract

This paper explores the role of FDI-spillover prevention costs in the strategic choice for a MNE of a developed country such as Japan about whether it perform FDI to an emerging economy such as Russia and China and about a degree of FDI spillovers that it allows. After discussing the exogenous spillover case in a duopoly model, this paper shows that with a quadratic prevention cost function, the MNE may choose a positive level of spillovers lower than the benchmark exogenous level, and also shows how endogenizing spillovers affect the home firm's decision on plant location. In the m-FDI-host-country firm case, the effects of the number of FDI-host country firms on the level of spillovers and the cutoff value of trade cost are not always monotonic.

Suggested Citation

  • Kiyoshi Matsubara, 2014. "Endogenous FDI Spillovers from Japan to Russia and China with Spillover-Prevention Costs," ERSA conference papers ersa14p999, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa14p999
    as

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    File URL: https://www-sre.wu.ac.at/ersa/ersaconfs/ersa14/e140826aFinal00999.pdf
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    References listed on IDEAS

    as
    1. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
    2. Ignatius J. Horstmann & James R. Markusen, 2021. "Endogenous market structures in international trade (natura facit saltum)," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 2, pages 25-45, World Scientific Publishing Co. Pte. Ltd..
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    FDI; Endogenous Spillovers; Spillover-prevention Costs;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • 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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