ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
Please use this identifier to cite or link to this item:
| || |
|Title:||Market structure, technological gap and vertical linkage effects from foreign direct investment |
|Authors:||Kadochnikov, Sergey M.|
Drapkin, Igor M.
|Issue Date:||2008 |
|Series/Report no.:||CESifo working paper 2227|
|Abstract:||This paper is based on the model of backward linkages from foreign direct investment (FDI) Lin/Saggi (2003), where the market structure of the final goods sector is represented by a monopoly or Cournot oligopoly, and the supplier sector by a pure monopoly. We extend this model by examining cases of perfect competition and a vertically integrated domestic company in the intermediate goods market. Our analysis shows that coming of foreign companies to the final goods sector provides positive backward linkage effects. Although this result doesnt depend on the market structure in the final goods sector, the latter significantly affects the size of FDI linkage effects the more competitive is the intermediate goods sector, the larger are the backward linkage effects. They reach their maximum under perfect competition in the intermediate goods market, minimum under monopoly in this sector, and medium size - when a vertically integrated local firm exists in the market. We have also discovered that a more competitive market structure per se doesnt guarantee larger positive effects of FDI. It is important that in addition to a competitive structure local firms do not significantly lag behind foreign firms in their technological level.|
|Subjects:||effects from foreign direct investment|
vertical linkage effects
|Document Type:||Working Paper|
|Appears in Collections:||CESifo Working Papers, CESifo Group Munich|
Download bibliographical data as:
Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.