Bundesbank paper confirms O-ring theory effect for FDI
Outsourced production processes that are further along the value chain are more likely to be located by the parent manufacturer in countries of higher productivity, according to a new discussion paper published by the Bundesbank.
In Testing the O-Ring Theory for FDI, Martina Engemann and Henrike Lindemann of the University of Munich say their findings confirm the implications of the O-ring theory for foreign direct investment (FDI), with robust results that are "not only statistically but also
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