FDI

Question 1

Vertical FDI and Horizontal FDI

Answer 1

Vertical FDI, where a foreign firm invests in a local supplier, can be particularly effective at generating productivity spillovers, as local firms can learn from the foreign firm’s management practices and technology.

Horizontal FDI, where a foreign firm competes directly with local firms in the same market.
- Not effective at creating productivity spillovers, as the foreign firm may be more likely to keep its knowledge and technology proprietary.
-limited spillovers

Question 2

Explain how each type can affect productivity spillovers in the host country