Impact Of Foreign Direct Investment On Horizontal Export Diversification

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This paper is an attempt to summarize The Impact of Foreign Direct Investment on Horizontal Export Diversification: Empirical Evidence Published in 2013 by Bedassa Tadesse and Elias K. Shukralla. In this article by Tadesse and Shukralla (2013) they postulate that a country’s willingness to trade under suitable conditions can lead to a country’s growth but it must have the proper structural transformation because relying on exporting has many weaknesses. Tadesse and Shukralla (2013) found that the impact of Foreign Direct Investment (FDI) did enhanced the horizontal diversification of exports.
Here it is important to explain some definitions used by Tadesse and Shukralla before continuing. Horizontal diversification is the acquisition or merger of competitors in a same, similar or different business (Hitt, Ireland, & Hoskisson, 2015). Foreign Direct Investment (FDI) is an investment made by a company or entity based in one country, into a company or entity based in another country (Investopedia, 2003).
The Purpose of the research by Tadesse and Shukralla’s (2013) pertains to the diversification of exports. These authors considered this method as a “sine qua non for an export-led economic growth strategy” (p. 142), which means, FDI is absolutely necessary for a country that exports. These authors noted that there is much literature examining the FDI but not much on studies directly linking FDI with export diversification. These authors’ further stated

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