chapter  2
15 Pages

A review of foreign direct investment and productivity spillovers

Theories of FDI Theories of MNEs in Dunning’s paradigm Multinational affiliates can compete with local firms in host countries due to their advantage in productivity. Without productivity advantage, multinational affiliates can never survive in competition with local firms as the former face extra cost in doing business in overseas markets, including communication cost, higher pay for stationing employees overseas, and barriers of language and culture (Hymer 1976).