Foreign direct investment, agglomerations, and demonstration effects: An empirical investigation |
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Authors: | Frank Barry Holger Görg Eric Strobl |
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Institution: | (1) University College Dublin, Ireland;(2) University of Nottingham and DIW Berlin, Germany;(3) Catholic University of Leuven, Belgium;(4) School of Economics, University of Nottingham, NG7 2RD Nottingham, UK |
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Abstract: | Previous studies have shown that the localisation of firms can be an important factor in attracting new foreign direct investment
into a host country. The authors distinguish between “efficiency agglomerations” which arise as firms increase their efficiency
by locating close to each other, and “demonstration effects” whereby existing firms send signals to new investors as to the
reliability and attractiveness of the host country. They try to disentangle these two effects by examining the location of
US firms in Ireland. They find that both sources of agglomerations have been important determinants of US firm entry into
Ireland. JEL no. F23 |
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Keywords: | Foreign direct investment agglomerations demonstration effects |
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