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Foreign Entry and Spillovers with Technological Incompatibilities in the Supply Chain

Carluccio, JF and Fally, T (2013) Foreign Entry and Spillovers with Technological Incompatibilities in the Supply Chain Journal of International Economics., 90 (1). pp. 123-135.

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Abstract

Does foreign entry improve host country productivity and welfare? Previous studies have looked at the role of backward linkages with domestic suppliers and their effects on domestic competitors. In this paper, we study how these externalities are affected by technological incompatibilities between foreign and domestic technologies. When foreign technologies require specialized inputs, some local suppliers self-select into production for multinational firms. A decrease in the cost of inputs compatible with the foreign technology has heterogeneous effects. It benefits foreign firms and the most productive downstream domestic firms that adopt the foreign technology, and negatively affects firms using the domestic technology. Technological incompatibilities reduce the welfare gains from openness to FDI, but this negative effect can be overcome by domestic technology adoption. The model's predictions are consistent with the stylized facts drawn from the empirical literature on FDI spillovers.

Item Type: Article
Divisions : Faculty of Arts and Social Sciences > Surrey Business School
Authors :
AuthorsEmailORCID
Carluccio, JFUNSPECIFIEDUNSPECIFIED
Fally, TUNSPECIFIEDUNSPECIFIED
Date : 1 January 2013
Identification Number : 10.1016/j.jinteco.2012.08.004
Related URLs :
Additional Information : NOTICE: this is the author’s version of a work that was accepted for publication in Journal of International Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of International Economics, 90(1), January 2013, DOI 10.1016/j.jinteco.2012.08.004.
Depositing User : Symplectic Elements
Date Deposited : 20 Apr 2015 13:43
Last Modified : 20 Apr 2015 13:43
URI: http://epubs.surrey.ac.uk/id/eprint/807355

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