Multinationals without Advantages |
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Authors: | Andrea Fosfuri & Massimo Motta |
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Institution: | Universidad Carlos III de Madrid, Madrid, Spain,;European University Institute, San Domenico di Fiesole, Italy and Universitat Pompeu Fabra, Barcelona, Spain |
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Abstract: | We question the widespread argument that firms embarking on foreign direct investments must possess some specific advantages to offset the penalties of operating across national and cultural boundaries. A simple model shows that firms might invest abroad to capture local advantages through geographical proximity of plant location, rather than to exploit existing ones. Because of spatially bounded spillovers, laggard firms might use foreign investments to acquire location-specific knowledge, whereas leading firms might prefer costly exports to avoid the dissipation of their advantages. JEL classification: F 23; O 32; L 22 |
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Keywords: | foreign direct investment exports technological spillovers |
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