Skip to main content
Incentives for foreign direct investment under imitation
Canadian Journal of Economics
  • Ping LIN, Lingnan University, Hong Kong
  • Kamal SAGGI, So Methodist University, United States
Document Type
Journal article
Publication Date

We study the symmetric mixed strategy equilibrium of a dynamic model where at each instant two exporting firms choose their probability of foreign direct investment (FDI). The first firm's FDI generates cost-lowering spillovers for the second and leads to local imitation, thereby intensifying competition. While an increase in imitation risk usually makes FDI less likely, there exist parameter values for which the converse holds. The key point is that by delaying the second firm's switch to FDI, an increase in imitation risk can increase the value of being first to invest, thereby increasing the equilibrium probability of FDI.

Publisher Statement

Copyright © 1999 Canadian Economics Association

Access to external full text or publisher's version may require subscription.

Full-text Version
Publisher’s Version
Citation Information
Lin, P., & Sggi K. (1999). Incentives for foreign direct investment under imitation. Canadian Journal of Economics, 32(5), 1275-1298. doi: 10.2307/136482