Comments and Discussion

Abstract

Robert Z. Lawrence: The authors of this informative paper present their work as a challenge to literature on multinational firms. Their paper explores the distinction between horizontal foreign direct investment (FDI), which exists because "trade barriers make exporting costly," and vertical FDI, which arises "to take advantage of international factor-price differences." The authors argue that vertical FDI is more prevalent than the literature has suggested. They also find that the motives for FDI are more complicated than the simple distinction between vertical and horizontal FDI implies. In particular, they point out the importance of FDI to seek export platforms, outsource, and provide wholesale services. In these comments, I will first react to the issue of vertical versus horizontal FDI and then turn to some comments on the findings of more diverse motivations for FDI.