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Government policies, market imperfections, and foreign direct investment

By Thomas L. Brewer

Abstract

Abstract. The internalization/eclectic theory of foreign direct investment includes the important insight that government policies create market imperfections, which make foreign direct invest-ment an economically rational strategic alternative for firms. This paper reexamines the effects of government policies on market imperfections and foreign direct investment (FDI). It broadens and refines the analysis of the impact of government policies by developing the following arguments: (1) There is a wide range of government policies that affect firms ' FDI decisions via their effects on market imperfections. (2) There are numerous dimensions of variability in government policies that need to be identified in order to understand fully the effects of government policies on market imperfections and hence FDI flows. (3) Some of the effects of government policies on market imperfections and FDI are the opposite of those previously noted in the FD

Year: 1993
DOI identifier: 10.1057/palgrave.jibs.8490227
OAI identifier: oai:CiteSeerX.psu:10.1.1.950.8658
Provided by: CiteSeerX
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