ABSTRACT
This chapter examines a form of trading relationship between countries that has also become increasingly widespread in recent decades. Just as much trade between western industrialised countries over the past fifty years has taken the form of intra-industry trade, much of the foreign direct investment (FDI) taking place in western industrialised economies has also been a two-way affair. One outcome of FDI that is motivated by the need to eliminate oligopolistic uncertainty, is a tendency towards the 'bunching' of FDI in a particular country or region. Bunching is the process whereby, when one firm in an oligopolistic industry sets up a subsidiary in a particular country, other rival sellers quickly follow suite. The potential user may be an independent firm in no way related to the company selling the technology or it may be a wholly or partly owned subsidiary of the latter.
