In this chapter, we develop a simple model that explores FDI's effect on backward linkages and that accommodates both of these preceding views. The model considers the effects of a multinational's entry that enjoys market power and also transfers technology to the local economy. We also provide a detailed discussion of the existing analytical work on FDI and backward linkages in order to highlight the contribution made by our model and to indicate avenues for future research.
|Title of host publication||Does foreign direct investment promote development?|
|Publisher||Center for global development, Institute for International Economics|
|Number of pages||16|
|Publication status||Published - 1 Jan 2005|
LIN, P., & SAGGI, K. (2005). Multinational firms and backward linkages : a critical survey and a simple model. In Does foreign direct investment promote development? (pp. 159-174). Center for global development, Institute for International Economics. http://www.petersoninstitute.org/publications/chapters_preview/3810/07iie3810.pdf