Information Externalities Affecting the Dynamic Pattern of Foreign Direct Investment [electronic resource] : The Case of China / Sayuri Shirai.
Material type: TextSeries: IMF Working Papers; Working Paper ; No. 94/44Publication details: Washington, D.C. : International Monetary Fund, 1994Description: 1 online resource (28 p.)ISBN: 1451974647 :ISSN: 1018-5941Subject(s): Direct Investment | FDI | Foreign Direct Investment | Foreign Investors | Investment Environment | China, People's Republic ofAdditional physical formats: Print Version:: Information Externalities Affecting the Dynamic Pattern of Foreign Direct Investment : The Case of ChinaOnline resources: IMF e-Library | IMF Book Store Abstract: The dynamic pattern of foreign direct investment (FDI) in developing countries shows a three-phase pattern. Despite government policies that promote it, initially the inflow of FDI is sluggish, followed by a period of considerable fluctuation before finally entering the stage of rapid growth. The paper explains the pattern through recourse to two concepts: the searching process of individual investors and the information externalities of investors in the aggregate. Policy implications that may serve to shift an economy of a developing country from small-scale FDI to one of rapidly expanding FDI are considered. As China is a clear example of this pattern, it has been selected to promote understanding of the process.The dynamic pattern of foreign direct investment (FDI) in developing countries shows a three-phase pattern. Despite government policies that promote it, initially the inflow of FDI is sluggish, followed by a period of considerable fluctuation before finally entering the stage of rapid growth. The paper explains the pattern through recourse to two concepts: the searching process of individual investors and the information externalities of investors in the aggregate. Policy implications that may serve to shift an economy of a developing country from small-scale FDI to one of rapidly expanding FDI are considered. As China is a clear example of this pattern, it has been selected to promote understanding of the process.
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