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Cross-Border Technology Investments In Recessions, Juliana Yu Sun, Huanhuan Zheng

Research Collection School Of Economics

Utilizing industry-level foreign direct investment (FDI) from 72 source markets to 122 destination markets between 2003 to 2018, we apply a differences-in-differences approach to evaluate the response of technology FDI to recessions. We find that research and development (R&D) intensive FDI drops when the destination market is in recession and the source market is in a normal state, and recovers to the pre-recession levels when both destination and source markets are in recession. The result is particularly pronounced in deep and long recessions, during the propagation stage of recessions, and in destination markets with stronger intellectual property protection, looser FDI …