APS-002: Canadian Direct Investment Abroad: What Role Do Differences in Technology Play in Vertical and Horizontal Direct Investment?

Erica Pohjola, Office of the Chief Economist, DFAIT
June, 2006

Executive Summary

This paper’s short analysis finds that Canadian Direct Investment Abroad (CDIA) is primarily vertically motivated rather than horizontally motivated, and that countries with technology levels closer to Canada’s are more likely to receive CDIA. This result still holds when only CDIA into advanced economies is examined. Although preliminary, the significance of vertically motivated CDIA points to the importance of involvement in global supply chains to Canada’s continuing prosperity.

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