FDI spillovers, New Industry Development, and Economic Growth

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Nguyen-Huu, Thanh Tam | Pham, Ngoc‐Sang

Edité par CCSD ; Wiley -

International audience. The paper investigates the optimal strategy of a small open economy receivingFDI in an optimal growth context. We prove that no domestic firm can enterthe new industry when the multinational enterprise’s productivity or the fixedentry cost is high. Nevertheless, the host country’s investment stock convergesto a higher steady state than an economy without FDI. A domestic firm entersthe new industry if its productivity is high enough. Moreover, the domestic firmcan dominate or even eliminate its foreign counterpart.

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