Dermot Leahy and Stephen Pavelin

"Follow-my-leader FDI and collusion"
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Abstract: This paper presents a simple model to illustrate the following idea: domestic rivals may be motivated to set up foreign production in the same country because the replication of each other's foreign direct investment (FDI) facilitates collusive behavior in the market in which they compete. This implies positive interdependence between firms' FDI decisions, i.e., foreign investment by one firm brings increased incentive for others to follow suit.