Title

Risk and the Technology Content of FDI: A Dynamic Model

Publication Type

Journal Article

Publication Date

2012

Abstract

This paper incorporates risk into the FDI decisions of firms. The risk of FDI failure increases with the gap between the South's technology frontier and the technology complexity of a firm's product. This leads to a double-crossing sorting pattern of FDI—firms of intermediate technology levels are more likely than others to undertake FDI. It is with the attempt to relax the upper bound of the technology content of FDI, we argue, that many FDI policies are created. The theory's predictions are consistent with the empirical patterns of FDI in China by US and Taiwanese manufacturing firms.

Keywords

Foreign direct investment, Technology, Risk, Spillover, Dynamic

Discipline

International Economics

Publication

Journal of International Economics

Volume

86

Issue

2

First Page

306-317

ISSN

0022-1996

Identifier

10.1016/j.jinteco.2011.09.001