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| Author: | Markusen, J. R. Venables, A. J. |
| Title: | Foreign direct investment as a catalyst for industrial development |
| Journal: | European Economic Review
1999 : FEB, VOL. 43:2, p. 335-356 |
| Index terms: | FOREIGN INVESTMENT INDUSTRIAL DEVELOPMENT COMPANIES MARKETS |
| Language: | eng |
| Abstract: | How does an FDI project affect local firms in the same industry ? Competition in the product and factor markets tends to reduce profits of local firms. Linkage effects to supplier industries, however, may reduce input costs and raise profits. The paper develops an analytical framework to assess these effects. Circumstances in which FDI is complementary to local industry are established, and it is shown how FDI may lead to the establishment of local industrial sectors. These sectors may grow to the point where local production overtakes and forces out FDI plants. |
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