Optimal integration strategies for the multinational firm

Grossman, Gene M.; Helpman, Elhanan; Szeidl, Ádám

doi:10.1016/j.jinteco.2005.07.011

Cited by 271 publications

(230 citation statements)

References 18 publications

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“…A growing recent literature (e.g., Motta and Norman, 1996;Grossman et al, 2006) stresses the increasing importance of yet a different type of FDI. This is the so-called "export-platform" FDI, whereby a firm sets up a production facility in a given market with the objective of serving mainly other destinations in the region.…”

Section: Regional Marketsmentioning

confidence: 99%

The Internationalization Process of Firms: From Exports to FDI?

2010

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Papers presented at this conference are made available to a broader audience in the NBB Working Paper Series (www.nbb.be). Terms of use: Documents in Statement of purpose:The purpose of these working papers is to promote the circulation of research results (Research Series) and analytical studies (Documents Series) made within the National Bank of Belgium or presented by external economists in seminars, conferences and conventions organised by the Bank. The aim is therefore to provide a platform for discussion. The opinions expressed are strictly those of the authors and do not necessarily reflect the views of the National Bank of Belgium. OrdersFor orders and information on subscriptions and reductions: National Bank of Belgium, Documentation -Publications service, boulevard de Berlaimont 14, 1000 Brussels. Maurizio Zanardi Université Libre de Bruxelles (ECARES) Preliminary version AbstractWe describe a simple model in which domestic firms decide whether to serve a foreign market through exports or horizontal foreign direct investment (FDI). This choice involves a trade-off between the higher variable trade costs associated with exports and the higher fixed set-up costs associated with establishing foreign subsidiaries. Crucially, firms are uncertain about their profitability in foreign markets and can only learn it by operating there. To obtain market-specific knowledge, firms may follow an "internationalization process", serving the foreign market via exports first and eventually, in some cases, switching to local subsidiary sales. To assess the validity of the predictions of our model, we use firm-level data on export and FDI decisions in individual destination markets for all companies registered in Belgium over the period [1997][1998][1999][2000][2001][2002][2003][2004][2005][2006][2007][2008]. We show that firms' strategies to serve foreign markets depend not only on the variable and fixed costs associated with exports and FDI, but also on the export experience they have acquired in that market.JEL classifications: F10, D21, F13.

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Section: Regional Marketsmentioning

confidence: 99%

The Internationalization Process of Firms: From Exports to FDI?

2010

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“…On the contrary, the least productive companies do not get involved in FDI; they produce and assemble in the home country, and export their final goods to other countries. Furthermore, as the fixed costs associated with the location of intermediate production in other country increase, the companies tend to produce and assemble intermediate goods at home country [7].…”

Section: Literature Review: Fdi Determinants and Regional Integrationmentioning

confidence: 99%

Fdi Determinants in the Eurasian Economic Union Countries and Eurasian Economic Integration Effect on Fdi Inflows

Zhumakankyzy¹,

Mukhamediyev²

2017

EoR

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1 The paper examines the potential determinants of foreign direct investment inflows into the region of Eurasian Economic Union, as well as incentives for investment into other neighboring countries. In the first model, the authors test a hypothesis on country specific foreign direct investment determinants for the Eurasian Economic Union region. The results of fixed effects estimation show that gross domestic product, infrastructure development and secondary education enrollment have a positive statistically significant effect on the foreign direct investment inflows into the region. Conversely, the impact of Customs Union on foreign direct investment appeared to be negative. Furthermore, in the second model of the natural experiment, the authors empirically test the hypothesis on Customs Union's effect on foreign direct investment while controlling for both country and time effects. The model includes evaluating the impact of the policy change on foreign investment inflows. The natural experiment outcome also points to the negative effect of Eurasian economic integration on foreign direct investment inflows. Although the countries of Eurasian Economic

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“…Grossman, Helpman, and Adam Szeidl expand the set of choices available to the firm to include production of intermediate goods and assembly performed at home, in another Northern country, in the low-wage South, or in several of these locations. 22 Notice that these choices include the so-called "export platform" FDI, under which production occurs in another Northern country for export from that country, as described by James Markusen and coauthors. 23 Grossman and Helpman study how the size of the cost differential between North and South, the extent of contractual incompleteness, the size of the industry, and the relative wage rate affect the organization of industry production.…”

Section: Foreign Direct Investmentmentioning

confidence: 99%

International trade and investment

2009

OECD in Figures

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Optimal integration strategies for the multinational firm

Cited by 271 publications

References 18 publications

The Internationalization Process of Firms: From Exports to FDI?

The Internationalization Process of Firms: From Exports to FDI?

Fdi Determinants in the Eurasian Economic Union Countries and Eurasian Economic Integration Effect on Fdi Inflows

International trade and investment

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