FDI Motive and Gains under Asymmetric Information
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Yiwei Huang, Anmin Zhang
This paper presents a model to analyze the shaping mechanism and allocation of the investment gains by multinational enterprise (MNE) when it enters the host market through cross-border merger. The results show that, with advanced micro-management techniques as a wide range of application of computer technology, the MNE can be more accurate in predicting changes in the productivity of a corporation of the host country after merging with it, and therefore more effective in allocating resources, and consequently will gain a greater profit than that of the host country’s corporation. This paper also infers that by choosing some proper FDI policies, the host country could share the profit with MNE.
FDI, asymmetric Information, gains, application of computer technology