The Relationship Between Domestic and Outward ForeignInvestment Revisited: The Impact of Industry-Specific Effects
2005 (English)Report (Other academic)
The ambiguity reported in previous research as regards the effect of foreign direct investment(FDI) on domestic investments is shown to be related to how industries are organized. Basedon a simple model including monitoring and trade costs, we argue that a complementaryrelationship should prevail in vertically integrated industries, whereas a substitutionaryrelationship can be expected in horizontally organized production. Applying iterative SURtechnique,the empirical analysis confirms a significant difference between the two categoriesof industries. To our knowledge, this is the first attempt to reconcile the inconclusivenessreported in previous empirical analyses.
Place, publisher, year, edition, pages
CESIS, KTH Royal Institute of Technology , 2005. , 29 p.
CESIS Working Paper Series in Economics and Institutions of Innovation, 35
FDI, complementarities, substitutes, knowledge intensity
IdentifiersURN: urn:nbn:se:kth:diva-72375OAI: oai:DiVA.org:kth-72375DiVA: diva2:487538
QC 201202082012-02-082012-01-312012-02-08Bibliographically approved