Abstract
AbstractTheories of foreign direct investment have been reviewed through several theoretical lenses, and any attempt to organize them requires a determination of which structural approach to follow. As the aim of this chapter is to identify theoretical and methodological tools useful for the study of FDI policy competition as a matter of institutional choice, the structure of this section will follow the approach of Agarwal (1980), later refined by Lizondo (1991), which draws a general distinction between FDI theories that assume perfect market conditions and theories that are based on imperfect markets.45 In the latter category, those theories that explicitly consider market imperfections that affect industry structure, location advantages and transactions costs are particularly emphasized. Following this methodological path will help to accentuate the institutional economics aspect of the analysis of FDI policy competition between governments.
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