Foreign Direct Investment with Endogenous Technology Choice

26 Pages Posted: 11 Nov 2014 Last revised: 7 Mar 2015

See all articles by Herbert Dawid

Herbert Dawid

Bielefeld University - Department of Business Administration and Economics; Center for Mathematical Economics

Benteng Zou

Centre de Recherche en Économie Appliquée (CREA)

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Date Written: November 10, 2014

Abstract

In this paper, we analyze optimal foreign direct investment of a firm which operates in a duopolistic market. We characterize a technology spillover threshold and show that for an intensity of spillovers below this threshold, there is a unique locally asymptotic stable steady state with a positive capital stock in the developing country. Furthermore, we characterize how optimal foreign investment patterns and the investor's value function depend on the level of technology transferred and characterize the optimal level to be used for the foreign direct investment.

Keywords: Foreign direct investment, technology spillovers, optimal control

JEL Classification: F21, D92, C61

Suggested Citation

Dawid, Herbert and Zou, Benteng, Foreign Direct Investment with Endogenous Technology Choice (November 10, 2014). Bielefeld Working Papers in Economics and Management No. 15-2014, Available at SSRN: https://ssrn.com/abstract=2521412 or http://dx.doi.org/10.2139/ssrn.2521412

Herbert Dawid (Contact Author)

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
D-33501 Bielefeld, NRW 33501
Germany
+49-521-1064843 (Phone)
+49-521-1062994 (Fax)

Center for Mathematical Economics ( email )

Postfach 10 01 31
Bielefeld, D-33501
Germany

Benteng Zou

Centre de Recherche en Économie Appliquée (CREA) ( email )

Campus Limpertsberg
162A, avenue de la Faïencerie
Luxembourg, 1511
Luxembourg

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