The Effects of Model Specification on Foreign Direct Investment Models: an Application of Count Data Models

Optimizing Location Among Three Countries Under Exchange Rate Uncertainty: Applying Real Options

“…Exporter will thus has to wait longer to transfer their production location. And this result resembles that of Dixit (1989) in terms of theory, and resembles that of Campa (1993) and Tomlin (2000) in terms of statistical analysis.…”

“…Exporter thus has to wait longer to transfer production location. And this result resembles that of Dixit (1989) in theory, while not being similar to that of Campa (1993) and Tomlin (2000) in the area of statistical analysis. Tomlin (2000) indicates this "troublesome" result may arise because of the unpredictability of real exchange rate behavior.…”

A Review of the Empirical Literature on FDI Determinants

“…Campa finds evidence for this using data on FDI into the US in the wholesale industry. Again, a broader firm-level database would be likely preferred to test these hypotheses and Tomlin [2000] also points out that the Campa [1993] estimates are sensitive to empirical specification. A related paper by Goldberg and Kolstad [1995] alternatively hypothesizes that exchange rate uncertainty will increase FDI by risk averse MNEs if such uncertainty is correlated with export demand shocks in the markets they intend to serve.…”

The endogeneity of the exchange rate as a determinant of FDI: A model of entry and multinational firms

“…He explains this phenomenon using the options theory reasoning: in the absence of sunk costs, a firm would simply produce overseas in any period when conditions were favorable, "and volatility would have no effect on the entry decision (p.619)". Although Tomlin (2000) indicates that some of Campa's econometric results may be sensitive to model specification, she clearly demonstrates that local fixed costs, such as advertising expenses, are alone sufficient to quell entry by foreign firms deciding whether to produce in the U.S.…”