Internalization and internationalization under copeting real options

Jan Hendrik Fisch

No 2006,15, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank

Abstract: The theories of internalization and internationalization provide general factors of international market entry but are not precise about its timing. A model of waiting and growth options seizes the importance of flexibility to FDI decisions and centers the impact of uncertainty. The results of a panel study using aggregates of 5379 German entries to 22 countries suggest that uncertainty has a U-shaped influence on the probability of entry and a negative effect on the amount of capital whereas it leaves the share in capital unaffected. Investors seem to treat foreign subsidiaries as real options on internationalization but not on internalization.

Keywords: Foreign Direct Investment; Market Entry Mode; Real Options; Uncertainty; Timing (search for similar items in EconPapers)
JEL-codes: D81 D92 F21 L60 (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdp1:4354

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