FDI versus Exports: Multiple Host Countries and Empirical Evidence

Harald Oberhofer and Michael Pfaffermayr

No 2011-3, Working Papers in Economics from University of Salzburg

Abstract: There are two main options for companies to serve foreign markets: exports and foreign direct investment (FDI). Based on the Helpman, Melitz and Yeaple (2004) model for multiple host countries this paper derives a clear theoretical prediction for the decision between both strategies. A bivariate probit model is estimated using a large data set of European companies to analyze the probability of using one or the other strategy. The empirical evidence indicates that more productive firms less (more) probably use the export (FDI) strategy to serve foreign markets. Moreover, a considerable number of companies use a combination of both strategies to serve foreign markets, which is in line with a multiple country model.

Keywords: Heterogeneous Firms; Exports; Foreign Direct Investment; Multiple Host Countries; Bivariate Probit Estimation (search for similar items in EconPapers)
JEL-codes: C35 D21 F12 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2011-02-17
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: FDI versus Exports: Multiple Host Countries and Empirical Evidence (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:sbgwpe:2011_003

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