THE ROLE OF FDI IN FOSTERING EXPORTS FROM THE HOST COUNTRY

PAVLA VOZÁROVÁ

Abstract:

In this paper, I propose a theoretical model analyzing the impact of FDI on exports from the host country. Using the framework of monopolistic competition with heterogenous firms, I show that the entry of highly efficient MNEs increases competition in the export market, which leads to crowding-out of domestic exporters. As a result, even though overall efficiency of the industry increases, exports by this industry may decrease. Further on, I add into my model a potential spillover effect that FDI can induce by lowering costs associated to export activities for all firms. I show that in such situation, the increased efficiency is more likely to outweigh the negative competition effect, resulting in larger exports from the host country.

Keywords:
FDI, MNE, spillovers, exports

DOI: 10.52950/ES.2015.4.3.005

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APA citation:
PAVLA VOZÁROVÁ (2015). The Role of FDI in Fostering Exports from the Host Country. International Journal of Economic Sciences, Vol. IV(3), pp. 94-114. , DOI: 10.52950/ES.2015.4.3.005

Data:
Received: 12 Jun 2015
Revised: 6 Aug 2015
Accepted: 6 Sep 2015
Published: 20 Sep 2015


Copyright © 2015, Pavla Vozárová et al, pavla.vozarova@vse.cz