Title

Incentives for foreign direct investment under imitation

Document Type

Journal article

Source Publication

Canadian Journal of Economics

Publication Date

1-1-1999

Volume

32

Issue

5

First Page

1275

Last Page

1298

Abstract

We study the symmetric mixed strategy equilibrium of a dynamic model where at each instant two exporting firms choose their probability of foreign direct investment (FDI). The first firm's FDI generates cost-lowering spillovers for the second and leads to local imitation, thereby intensifying competition. While an increase in imitation risk usually makes FDI less likely, there exist parameter values for which the converse holds. The key point is that by delaying the second firm's switch to FDI, an increase in imitation risk can increase the value of being first to invest, thereby increasing the equilibrium probability of FDI.

DOI

10.2307/136482

Print ISSN

00084085

E-ISSN

15405982

Publisher Statement

Copyright © 1999 Canadian Economics Association

Access to external full text or publisher's version may require subscription.

Full-text Version

Publisher’s Version

Recommended Citation

Lin, P., & Sggi K. (1999). Incentives for foreign direct investment under imitation. Canadian Journal of Economics, 32(5), 1275-1298. doi: 10.2307/136482