Abstract
In the first chapter of this work, I propose a simple theoretical model describing how the inflow of foreign direct investment (FDI) in a host country influences local competitors within the industry, and subsequently, what the impact of this change is on input supplying firms in the upstream sector. In the second chapter, I discuss the fact that even though the presence of a foreign firm is considered to have strong potential to improve domestic economic conditions, including the performance of domestic firms within the sector where MNEs enter, empirical studies of the actual impact of FDI inflow on domestic firms present rather ambiguous results.
In the last chapter, I describe sourcing patterns of FDI activity and test empirically whether their impact on upstream sectors of the host economy is as predicted by theoretical models.