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POLICY RESEARCH WORKING PAPER

POLICY RESEARCH WORKING PAPER

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Published by chandmagsi
Mode of Foreign Entry
Technology Transfer, and
Foreign Direct Investment Policy
Mode of Foreign Entry
Technology Transfer, and
Foreign Direct Investment Policy

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Published by: chandmagsi on Aug 04, 2008
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10/15/2011

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POLICY
RESEARCHWORKINGPAPER
2737
Mode of Foreign Entry,
When technology transfer scostly, a foreign firm and host
TechnologyTransfer,and
country governmentmay
ForeignirectInvestment
differ n theirpreferencesverdirectentry and acquisition.
Policy
Governmentntervention
couldhelpinducethesociallypreferredchoice.
Aaditya MattooMarceloOlarreagaKamalSaggi
The World BankDevelopmentResearchGroup
Trade
December2001
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POLICYRESEARCHWORKINGPAPER2737
Summaryfindings
Foreigndirect investmentcantake place throughtheTheauthors identify the circumstancesin which thedirectentry of foreignfirms or theacquisition of existing choicesof the governmentand theforeign firmdomesticfirms.Mattoo, Olarreaga,and Saggi examinediverge-andin which domestic welfarecan be improvedthepreferencesof a foreign firm and thehost countrybyrestrictions on foreigndirect investmentthat inducegovernmentwith respectto these twomodes of foreignthe foreign firm to choosethe sociallypreferredmode ofdirect investmentin thepresence of costly technologyentry.transfer.The tradeoffbetween technologytransferandmarketcompetitionemergesas a keydeterminantofpreferences.Thispaper-aproduct of Trade,DevelopmentResearchGroup-ispartof a largereffort in the groupto understandthedeterminantsof trade in servicesndevelopingcountries. Copiesofthe paperare availablefreefrom theWorld Bank, 1818H StreetNW, Washington,DC 20433.PleasecontactRebecca Martin, roomMC3-308, telephone202-473-9065,fax 202-522-1159,emailaddress rmartinl@worldbank.org.PolicyResearchWorkingPapers arealso postedon the Webat http://econ.worldbank.org.The authorsmaybe contactedat amattoo@worldbank.org,molarreaga@worldbank.org,orksaggi@mailsmu.edu.December2001.(34pages)
The PolicyResearchWorkingPaper eriesdisseminateshe findingsof work inprogressoencouragehe exchange fideasaboutdevelopmentssues. n objective f theseriess togetthe indings utquickly, ven f the presentationsre esshan ullypolished.hepapers arry he namesof theauthorsand shouldbe citedaccordingly. heindings, nterpretations,ndconclusionsxpressednthispaperareentirely hoseof the authors.They do not necessarilyepresent heviewof theWorldBank, ts ExecutiveDirectors, r the
countriestheyrepresent.
Produced by the PolicyResearchDisseminationCenter
 
Modeof foreignentry,technology ransfer, and FDI policy
*
Aaditya Mattoot Marcelo Olarreagat Kamal Saggi§
JEL
classification numbers: F13, F23, 032Keywords: Foreign Direct Investment, Technology Transfer, Invest-ment Policies
*We are grateful to Mary Hallward-Driemeier, Maurice Schiff, Beata Smarzynska,
MichaelNicholson and participants at a seminar at the World Bank for very helpful com-ments and suggestions. The views expressed here are those of the authors and do notnecessarily correspond to those of the institutions to which they are affiliated.tThe World Bank, 1818 H Street, N.W., Washington, DC 20433. Phone: (202) 458-7611, fax: (202) 522 1159, e-mail: amattooiworldbank.org.tThe World Bank and
CEPR,
London, UK. Phone: (202) 458.8021, ax: (202) 522.1159e-mail: molarreaga©worldbank.org.§Department of Economics, Southern Methodist University, Dallas, TX 75275-0496.Phone (214) 768-3274, ax (214) 768-1821, -mail: ksaggiOmailsmu.edu.

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