Corporate Transparency, Cream-Skimming And FDI

Topics:
Foreign Direct Investment
Tags:
Currency & Foreign Exchange,
Elsevier,
Finance,
Foreign Direct Investment,
Foreign Direct Investment (FDI),
Investment
Source:
Elsevier

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Overview: The authors develop a simple information-based model of Foreign Direct Investment (FDI) flows. On the one hand, the relative abundance of ''Intangible'' capital in specialized industries in the source countries, which presumably generates expertise in screening investment projects in the host countries, enhances FDI flows. On the other hand, host-country relative corporate-transparency diminishes the value of this expertise, thereby reducing the flow of FDI. The model also demonstrates that the gains for the host country from FDI [over Foreign Portfolio Investment (FPI)] are reflected in a more efficient size of the stock of domestic capital and its allocation across firms. These gains are shown to depend crucially (and positively) on the degree of competition among FDI investors.

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Format: PDF | Size: 192KB | Date: Aug 2006 | Pages: 14


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