Three essays on foreign direct investment, trade, and growth

My dissertation investigates the impacts of Foreign Direct Investment (FDI) on industry innovation and international trade, examines the extent of Southern penetration, and assesses the growth and welfare effects of FDI.; In the first essay, I formalize a new vision of product-cycle trade in which the impetus of production moving to the South is not just the pull of cost-seeking FDI, but also the push of the competition pressure created by the invention of a superior product in the North. The model rationalizes dynamic trade patterns and FDI and R&D distributions--the extent of product-cycle trade is maximized in medium-tech industries, and is minimized in low-tech and high-tech industries; R&D intensity is negatively correlated with FDI intensity to Southern countries.; In the second essay, I show that the relative intensities of FDI and R&D divide an industry spectrum into three groups and determine the extent of Southern penetration. In the high-tech group, the South never penetrates due to the ongoing Northern R&D. In the product-cycle group, the South dominates the production until the North improves its technology and recaptures the market. In the low-tech group, the North permanently exits the industry once the South enters. Increasing the South's size expands the low-tech and product-cycle groups; expanding the North's size extends the high-tech group; subsiding FDI expands the product-cycle group, but shrinks the low-tech group; subsiding Northern R&D limits the product-cycle group, but expands the low-tech group.; In the third essay, I investigate the impact of FDI on growth. This study makes a novel point of the "non-creative destruction" nature associated with FDI in contrast with the "creative destruction" nature associated with quality-improving R&D. FDI crowds out capital from R&D and takes the form of transferring existing technology that contributes no quality upgrading but delays for growth. On the other hand, via FDI, the South penetrates into the high-tech sector that releases Northern resources from manufacturing to R&D and enhances growth. Growth is positively correlated with a host country's developmental level; FDI may impair growth if the host country is severely underdeveloped.