search query: @author Lommerud, K. E. / total: 2
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| Author: | Konrad, K. A. Lommerud, K. E. |
| Title: | Foreign direct investment, intra-firm trade and ownership structure |
| Journal: | European Economic Review
2001 : MAR, VOL. 45:3, p. 475-494 |
| Index terms: | FOREIGN INVESTMENT TRADE ASYMMETRIC INFORMATION |
| Language: | eng |
| Abstract: | This paper considers a different aspect of intra-firm trade, showing that asymmetric information about the true opportunity cost of intra-firm trade can be efficiency with respect to a time consistency problem in foreign direct investment. Countries' governments often try to attract or compete for foreign direct investment. However, once the direct investment has been made and the investment is sunk, the host country has an incentive to confiscate profits from this investment. A multinational firm anticipates that it cannot repatriate any future earnings, and thus has no incentive to invest in the host country, even if the returns on this investment were extremely high. This is the hold-up problem in the context of foreign direct investment. |
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