The Role of FDI in Fostering Exports from the Host Country

Pavla Vozárová ()
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Pavla Vozárová: University of Economics, Prague

International Journal of Economic Sciences, 2015, vol. 4, issue 3, 94-114

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 (search for similar items in EconPapers)
JEL-codes: F23 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:sek:jijoes:v:4:y:2015:i:3:p:94-114

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