Outsourcing Versus Foreign Direct Investment: A Welfare Analysis
- Topics:
- Foreign Direct Investment
- Tags:
- Analysis,
- University Of Delhi,
- Outsourcing & Subcontracting,
- Outsourcing,
- It Operations,
- Investment,
- Foreign Direct Investment (FDI),
- Foreign Direct Investment,
- Finance,
- Currency & Foreign Exchange,
- ...
- Source:
- University of Delhi
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Overview: Foreign direct investment may not necessarily be the most welfare enhancing form of international investment. The host country may avail options like - Joint venture, technology licensing, franchising, outsourcing etc. A host country's choice of organizational form should depend on its growth and welfare effects. This paper compares the welfare effects of FDI (Foreign Direct Investment) with that of outsourcing in the host country using Grossman-Helpman quality ladders framework. If the host absorptive capacity is above a threshold level, outsourcing is more welfare enhancing vis-à-vis FDI; while even with lower than threshold absorptive capacity, outsourcing being welfare improving over FDI is not ruled out.
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Format: PDF | Size: 117KB | Date: Sep 2005 | Pages: 28
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