Abstract
Analyses the influence of export share and domestic content
policies on the level of capital investment undertaken by a
multinational firm both in its home country and in the foreign country
in which it operates. These protective policies, in force in both
developing and industrialized countries, require the firm to employ a
certain proportion of inputs from the foreign country in which it
operates and to export a certain proportion of its output abroad. Cases
examined in the analysis include those for which the firm faces
uncertainty in the production process in the host and home countries;
and in neither country. Finds that both of these policies can have
spillover effects to the home country as well, i.e. when there is
uncertainty in production in the home country, these policies can reduce
the optimal level of investment in the home country, too.