Mode of Foreign Entry, Technology Transfer, and FDI Policy

42 Pages Posted: 26 Jul 2001

See all articles by Aaditya Mattoo

Aaditya Mattoo

World Bank - Development Research Group (DECRG)

Marcelo Olarreaga

University of Geneva; Centre for Economic Policy Research (CEPR)

Kamal Saggi

Southern Methodist University (SMU) - Department of Economics

Date Written: June 2001

Abstract

Foreign Direct Investment (FDI) can take place either through the direct entry of foreign firms or the acquisition of existing domestic firms. The preferences of a foreign firm and the host country government over these two modes of FDI are examined in the presence of costly technology transfer. The trade-off between technology transfer and market competition emerges as a key determinant of preferences. The paper identifies the circumstances in which the government and foreign firm's choices diverge, and how domestic welfare can be improved by restrictions on FDI which induce the foreign firm to choose the socially preferred mode of entry.

Keywords: Foreign Direct Investment, technology transfer, investment policies

JEL Classification: F13, F23, O32

Suggested Citation

Mattoo, Aaditya and Olarreaga, Marcelo and Saggi, Kamal, Mode of Foreign Entry, Technology Transfer, and FDI Policy (June 2001). CEPR Discussion Paper No. 2870. Available at SSRN: https://ssrn.com/abstract=276776

Aaditya Mattoo (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H Street, N.W.
Room MC 3-327
Washington, DC 20433
United States
202-458-8047 (Phone)
202-676-9810 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/amattoo

Marcelo Olarreaga

University of Geneva ( email )

40 Boulevard du Pont-d'Arve
Genève, CH - 1205
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Kamal Saggi

Southern Methodist University (SMU) - Department of Economics ( email )

Dallas, TX 75275
United States
214-768-3274 (Phone)
214-768-1821 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
24
Abstract Views
1,901
PlumX Metrics