|Marin, Dalia; Schnitzer, Monika (2011): When is FDI a capital flow? In: European Economic Review, Vol. 55, No. 6: pp. 845-861|
In this paper we analyze the conditions under which a foreign direct investment (FDI) involves a net capital flow across countries. For this purpose, we investigate how multinational firms finance their foreign affiliates, globally or locally. We develop a contract theoretical model in which the financing structure is used to govern the incentives of managers. We find that the investment tends to be financed locally if managerial incentive problems are large. Thus, microeconomic governance problems may have macroeconomic implications for the net capital flow to host countries. Our results are consistent with survey data on German and Austrian investment flows of firms to Eastern Europe.
Economics > Chairs > Chair of International Economics
Economics > Chairs > Seminar for Comparative Economics
|Subjects:||300 Social sciences > 330 Economics|
|Deposited On:||15. Apr 2014 08:49|
|Last Modified:||29. Apr 2016 09:16|