Entry into a Foreign Market: Foreign Direct Investment Versus Licensing

REVIEW OF INTERNATIONAL ECONOMICS, (4) February 1996

Posted: 17 Apr 1998

See all articles by Kamal Saggi

Kamal Saggi

Southern Methodist University (SMU) - Department of Economics

Abstract

We compare foreign direct investment (FDI) and technology licensing as two modes of entry into a foreign market. While direct entry via FDI dissipates rents in the host country, opportunistic competition from a licensee may erode rents in the entrant's other markets. Since FDI increases competition in the host country while licensing stifles it, welfare is higher under FDI than under licensing.

JEL Classification: F23, O23, O34

Suggested Citation

Saggi, Kamal, Entry into a Foreign Market: Foreign Direct Investment Versus Licensing. REVIEW OF INTERNATIONAL ECONOMICS, (4) February 1996, Available at SSRN: https://ssrn.com/abstract=4171

Kamal Saggi (Contact Author)

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

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

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