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Research Seminar with Professor Alexander Eapen
September 25, 2014 @ 12:00 am - 1:05 pm
FDI external effects and financial market distortions
A key puzzle in the FDI spillover literature is why the empirical evidence for technology external effects is not very consistent across studies. In general, positive technology spillovers from foreign to domestic firms have been observed mostly in developed than in developing countries. Our key pitch in this paper is that inconsistent empirical findings across developed and developing country contexts could be a reflection of the differences in their host-country financial markets. Firstly, we argue that distortions in domestic financial markets – more specifically, misallocation of capital across firms in the economy – can be a critical bottleneck for positive external effects of FDI to materialize. Secondly, we argue that a marginal increase in the level of FDI in a host country generates significantly less technological external effects in the economy when capital is misallocated across domestic firms than when allocation is efficient. Based on this, as well as on a counterfactual simulation exercise, we show that correcting misallocation in the economy can lead to significantly higher FDI externalities.
Alex Eapen’s bio in brief
Dr. Alex Eapen earned his doctoral degree from Tilburg University, The Netherlands in June 2007, and is currently a senior lecturer in Strategy at the Research School of Management at ANU.
His current research seeks to better understand the impact of multinational enterprises (MNE) on host country firms and economies. The specific questions his research seeks to answer are (a) what are the conditions that make the presence of foreign MNEs beneficial to host country firms? and (b) empirically,how can we correctly estimate the magnitude of such ‘external effects’ of foreign MNEs? These issues have far reaching implications, not only theoretically, but also for practice and policy formulation.
His research has been published in journals such as Journal of International business Studies, and Canadian Journal of Administrative Sciences
Dr. Eapen has received several international awards for his research. His doctoral thesis was one of the four finalists for the coveted Gunnar Hedlund prize (2007) by the Stockholm School of Economics for the best dissertation in International business written at universities around the world. He also won the Verity Awardfor the most outstanding paper published in the Canadian Journal of Administrative Sciences in 2009. And most recently, his publication titled ‘Social structure and technology spillovers from foreign to domestic firms’ was selected and highlighted by the editors of the Journal of International Business Studies as an example of ‘groundbreaking scholarship’