Are FDI Firms Always More Productive? The Role of Technology Transfer Costs
Journal
Academia Economic Papers
Journal Volume
39
Journal Issue
3
Pages
369-395
Date Issued
2011
Date
2011
Abstract
In contrast to mainstream literature, which maintains that more productive firms in the industry prefer FDI to outsourcing, we find in this paper that the opposite may also be true. By incorporating technology transfer and organizational costs in the model, we show that the decision made by productive firms to engage in FDI depends crucially on the maturity level of the industry. An FDI cycle emerges from this model, illustrating a negative relationship between industry maturity and the productivity of investing firms. Our statistical test on Taiwan's manufacturing firms supports our argument.
SDGs
Type
journal article
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