Foreign Investment And The Mediation Of Trade Flows
- Topics:
- Foreign Direct Investment
- Tags:
- Asset,
- Asset Management,
- Business Operations,
- Currency & Foreign Exchange,
- Finance,
- Foreign Direct Investment (FDI),
- Investment,
- Operational Planning,
- University Of California
- Source:
- University of California, Davis
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Overview: How does foreign direct investment affect the trade between nations? Most theories of the multinational firm assume that imports and foreign affiliate production are substitutes. In this framework multinational firms possess firm-specific assets or advantages, and a primary question they face is how they may best exploit their unique assets. The multinational has to evaluate whether it maximizes its worldwide profits by producing at home and exporting, or by investing abroad and shifting production to its foreign affiliates. The goal of this paper is to provide empirical evidence regarding the magnitude of these competing effects of foreign investment on trade, and in so doing, to reconcile the contrary empirical findings that arise from aggregate versus to micro trade analyses of this question.
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Format: PDF | Size: 83KB | Date: Oct 2005 | Pages: 36
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