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FDI entry models, development and technological spillovers

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Alvarez González, Isabel and Marín Sanz, Raquel and Santos Arteaga, Francisco J. (2011) FDI entry models, development and technological spillovers. [ Working Paper; nº 04, 2011, ]

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Abstract

Most of the literature related to foreign direct investment in developing countries focuses on the incentives of local producers to incur in the technological development costs required to act as suppliers of multinational companies (MNC). Scarce attention has been paid to the strategic interactions derived from the potential (reciprocal) technological spillovers between local firms and MNC subsidiaries, with the recent exception of the theoretical model by Sanna-Randaccio and Veugelers (2007). Such a void in the literature is justified on the technological differences between MNC and local firms, assuming that both of them produce for totally independent markets under no direct competition conditions. If this were the case, MNC entry modes in underdeveloped countries should be independent of their level of development. We reject such a simplification illustrating empirically how entry modes depend on the development level of a given host country. Besides, this finding is justified with a theoretical proposal that generalizes the Sanna-Randaccio and Veugelers (2007) model. Our extension accounts for all the possible equilibrium scenarios jointly defined by the strategies of both the MNC and the local firms, which allows us to consider the equilibria ignored in a partial analysis and to provide a general equilibrium explanation for the evidence presented.

Resumen (otros idiomas)

La literatura económica sobre inversión directa extranjera (IDE) en países en desarrollo se centra fundamentalmente en los incentivos que llevan a los productores locales a incurrir en los costes de desarrollo tecnológico requeridos para poder formar parte de la red de proveedores de las empresas multinacionales (EMN). Sin embargo, se ha prestado hasta ahora poca atención a las interacciones estratégicas que se derivan de los potenciales derrames tecnológicos (recíprocos) entre las empresas locales y las subsidiarias de las EMN, exceptuando el reciente trabajo teórico de Sanna-Randaccio y Veugelers (2007). Este vacío en la literatura se justifica mediante las diferencias tecnológicas que existen entre las empresas locales y las EMN, asumiéndose que estos dos tipos de empresas producen para mercados independientes y no compiten directamente. Si ese fuera el caso, la forma de entrada de las EMN en países en desarrollo sería independiente del nivel de desarrollo de los mismos. Este trabajo rechaza dicha simplificación e ilustra de manera empírica cómo las formas de entrada dependen del nivel de desarrollo de los países receptores de la IDE. Asimismo, este resultado empírico se justifica mediante una propuesta teórica que generaliza el modelo de Sanna-Randaccio y Veugelers (2007). Nuestra extensión tiene en cuenta todos los posibles equilibrios definidos conjuntamente por las estrategias de las EMN y las empresas locales, lo cual permite analizar los equilibrios no derivados en un análisis parcial al tiempo que proporciona una explicación de equilibrio general a la evidencia obtenida previamente.

Item Type:Working Paper or Technical Report
Uncontrolled Keywords:Multinational Companies; Technological Spillovers; Developing Countries; Entry modes.
Palabras clave (otros idiomas):Empresas multinacionales; Derrame tecnológico; Países en desarrollo; Formas de entrada.
Subjects:Social sciences > Economics > Econometrics
Social sciences > Economics > Economic development
Series Name:Working Paper
Volume:2011
Number:04
ID Code:12613
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Deposited On:05 May 2011 08:39
Last Modified:09 Jun 2016 11:50

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