Foreign direct investment, competition and industrial development in the host country

@inproceedings{Barrios2005ForeignDI,
  title={Foreign direct investment, competition and industrial development in the host country},
  author={Salvador Barrios and Holger G{\"o}rg and Eric Strobl},
  year={2005}
}
This paper analyses the impact of foreign direct investment (FDI) on the development of local firms. We focus on two likely effects of FDI: A competition effect which deters entry of domestic firms and positive market externalities which foster the development of local industry. Using a simple theoretical model to illustrate how these forces work we show that the number of domestic firms follows a u-shaped curve, where the competition effect first dominates but is gradually outweighed by… CONTINUE READING

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