Kiel Working Papers, Kiel Institute for World Economics
No 930:
Temporal Clusters in Foreign Direct Investment
Jörn Kleinert
Abstract: Foreign Direct Investment (FDI) occurs in temporal
clusters. In contrast to the existing literature, which explains these
clusters as being a result of oligopolistic reaction, this paper presents a
two-by-two-by-two general equilibrium model of companies which engage in
monopolistic competition. These companies can serve a foreign market
through exports or by producing abroad. With falling transport and
communication costs, the internationalisation of production becomes
profitable and, thus, multinational enterprises (MNE) emerge. In this
process, FDI of companies from one country occurs in clusters, because an
FDI of one company increases the profitability of FDI of any other national
competitor.
JEL-Codes: C62; F12; F23; (follow links to similar papers)
50 pages, June 1999
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