| By: |
Chrysovalantou Milliou (Department of International and European Economic Studies);
Joel Sandonís Díez (Universidad de Alicante) |
| Abstract: |
According to conventional wisdom, multinational firms undertake vertical FDI
in order to take advantage of cross-border factor cost differences and source
the inputs from abroad at better terms. Recent empirical findings though
document that this is not always the case. We provide theoretical support to
the latter by demonstrating that when there is transfer of intangible assets
between a multinational’s vertically related production plants, its parent
firm can engage in vertical FDI in order to improve its cross-threat and its
input sourcing terms domestically and not abroad as well as in order to
exploit its intangible assets in another country. We also investigate the
effects of trade liberalization and the welfare consequences of vertical FDI. |
| Keywords: |
international trade; vertical FDI; inputs; trade liberalization; intangible assets; two-part tariffs |
| JEL: |
L13 L22 L23 |
| Date: |
2017–03 |
| URL: |
http://d.repec.org/n?u=RePEc:ivi:wpasad:2017-02&r=ind |