Mode of Foreign Entry, Technology Transfer, and Foreign Direct Investment Policy

Mode of Foreign Entry, Technology Transfer, and Foreign Direct Investment Policy

Foreign direct investment can take place through the direct entry of foreign firms or the acquisition of existing domestic firms. Mattoo, Olarreaga, and Saggi examine the preferences of a foreign firm and the host country government with respect to these two modes of foreign direct investment in the presence of costly technology transfer. The tradeoff between technology transfer and market competition emerges as a key determinant of preferences. The authors identify the circumstances in which the choices of the government and the foreign firm diverge-and in which domestic welfare can be improved by restrictions on foreign direct investment that induce the foreign firm to choose the socially preferred mode of entry.

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Bibliographic Details
Main Authors: Mattoo, Aaditya, Olarreaga, Marcelo, Saggi, Kamal
Language:English
en_US
Published: World Bank, Washington, DC 2001-12
Subjects:BARGAINING POWER, COMPETITIVE MARKETS, DIRECT INVESTMENT, DOMESTIC COMPETITORS, DOMESTIC ECONOMY, DOMESTIC FIRM, DOMESTIC FIRMS, DOMESTIC MARKET, EVALUATION OF TECHNOLOGY, FDI, FOREIGN DIRECT INVESTMENT, FOREIGN ENTRY, FOREIGN EQUITY PARTICIPATION, FOREIGN FIRM, FOREIGN FIRMS, FOREIGN INVESTMENT, FOREIGN OWNERSHIP, HOST COUNTRIES, HOST COUNTRY, HOST-COUNTRY, INTELLECTUAL PROPERTY, INTELLECTUAL PROPERTY RIGHTS, INTERNATIONAL ECONOMICS, INVESTMENT POLICY, LOCAL MARKET, MARGINAL COST, MARKET POWER, MARKET SHARE, MARKET STRUCTURE, MARKET STRUCTURES, POLICY RESEARCH, POLITICAL ECONOMY, R&D-INTENSIVE INDUSTRIES, SERVICES MARKETS, TECHNOLOGY DIFFUSION, TECHNOLOGY TRANSFER, TECHNOLOGY TRANSFERS, TELECOMMUNICATIONS, TELECOMMUNICATIONS SERVICES, TRANSFER PRICES, TRANSFERRING TECHNOLOGY TECHNOLOGY TRANSFER, FOREIGN DIRECT INVESTMENTS, INTERVENTION, GOVERNMENT ROLE, FOREIGN COMPANIES,
Online Access:http://documents.worldbank.org/curated/en/2001/12/1660275/mode-foreign-entry-technology-transfer-foreign-direct-investment-policy
https://hdl.handle.net/10986/19401
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Summary:Foreign direct investment can take place through the direct entry of foreign firms or the acquisition of existing domestic firms. Mattoo, Olarreaga, and Saggi examine the preferences of a foreign firm and the host country government with respect to these two modes of foreign direct investment in the presence of costly technology transfer. The tradeoff between technology transfer and market competition emerges as a key determinant of preferences. The authors identify the circumstances in which the choices of the government and the foreign firm diverge-and in which domestic welfare can be improved by restrictions on foreign direct investment that induce the foreign firm to choose the socially preferred mode of entry.

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