The author thanks Emmanuel Petrakis, Apostolis Pavlou and Christos Cabolis for useful comments. This research has been co-financed by the European Union (European Social Fund—ESF) and Greek national funds through the Operational Program ‘Education and Lifelong Learning’ of the National Strategic Reference Framework (NSRF)—Research Funding Program: Thalis—Athens University of Economics and Business—‘New Methods in the Analysis of Market Competition: Oligopoly, Networks and Regulation’. Full responsibility for all the shortcomings remains that of the author.
Location for Foreign Direct Investment in Vertically Related Markets
Version of Record online: 2 DEC 2013
© 2013 John Wiley & Sons Ltd
Review of International Economics
Volume 22, Issue 2, pages 326–341, May 2014
How to Cite
Milliou, C. (2014), Location for Foreign Direct Investment in Vertically Related Markets. Review of International Economics, 22: 326–341. doi: 10.1111/roie.12106
- Issue online: 1 APR 2014
- Version of Record online: 2 DEC 2013
This paper studies a multinational enterprise's (MNE's) location decision in a vertically related market with endogenous vertical technology transfer (VTT). We show that, even though VTT is more costly in a less developed country, an MNE can transfer more technology there than in a developed country (DC). When the opposite occurs, the MNE sometimes locates in a DC where, although it faces stronger competition, it obtains the input at better terms. Therefore, by arguing that the MNE's decision can be crucially affected by the upstream market's outcomes, an alternative explanation is provided for the commonly observed foreign direct investment (FDI) in DCs.