This paper examines whether policies to promote foreign direct investment (FDI) make economic sense. The discussion focuses on whether existing academic research suggests that the benefits of FDI are sufficient to justify the kind of policy interventions seen in practice. For small open economies, efficient taxation of foreign and domestic capital depends on their relative mobility. If foreign ...

The failure of foreign aid to promote growth in the developing world has received significant attention as evidence suggests that foreign aid does not translate into investment. This research has demonstrated that poor institutions in these developing economies (particularly with respect to property rights) results in an inability to fully appropriate the return to one’s investment, thereby ser...

Evolutionary understanding of behaviour of firms is gradually becoming more accepted in a variety of disciplines such as economics, management and organization. Contributing to a multidisciplinary understanding of strategic behaviour, this paper analyzes foreign direct investment strategies of US firms in Europe since the second world war. Taking routinized investment behaviour, satisficing str...

The paper analyzes the effects of a regionally coordinated profit tax in a model with three active countries, one of which is not part of the union, and a globally mobile firm. We show that regional tax coordination can lead to two types of welfare gains. First, for investments that would take place in the region in the absence of coordination, this measure can transfer location rents from the ...

The paper develops a model of foreign direct investments (FDI) and foreign portfolio investments (FPI). FDI enables the owner to obtain refined information about the firm. This superiority, relative to FPI, comes with a cost: a firm owned by the FDI investor has a low resale price because of asymmetric information between the owner and potential buyers. The model can explain several stylized fa...

We examine the impacts of agglomeration economies on the location of Foreign Direct Investment (FDI) in Vietnam. Using a large dataset that provides detailed information about individual firms, we investigate the location choices by 920 newly created foreign firms in 2009 in about 125 different 4-digit industries. The estimates of the conditional logit model show that agglomeration benefits mot...

This paper evaluates various channels through which foreign technology diffuses to the manufacturing sector of selected developing economies. These economies carry out very little (if any) own R&D so they rely on foreign technology to a much larger extent than developed economies. We investigate the direct effect of foreign R&D, as well as technology embodied in imports of intermediate and capi...

This paper analyzes the prices paid by foreign companies for acquisitions in the United States relative to the price paid by US companies for mergers. The ultimate purpose of this research is to determine if overpayment by foreign companies for M&A foreign direct investment in the United States is responsible for the historically low returns of foreign companies on their direct investments with...

Nearly ten years have elapsed since the introduction of the Canada-US Free Trade Agreement (FTA). At the time the agreement was negotiated concern was expressed that the reduction of tariff barriers would remove the incentive for much US foreign direct investment (FDI) into Canada. This paper provides empirical evidence to show that US foreign direct investment into Canada has continued to grow...