Capacity Choice and Preemption of a Foreign Market

Stefano Vannini
Additional contact information
Stefano Vannini: UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)

No 1993018, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: This paper studies the strategic role of foreign direct investment (FDI) in a framework with early-on capacity investments by a multinational enterprise (MNE) and relevant fixed costs. A three-stage game is considered : (i) MNE chooses internationalisation mode, and output to precommit by capacity investment ; (ii) local firm (HCF) decides about entry ; (iii) active firm(s) choose output. Cases exist in which MNE chooses FDI even if neither " exporting costs " nor firm-specific fixed costs are considered. Moreover, market preemption is not the only alternative justification for FDI. Credibility sometimes limits MNE’s strategic leadership ; this does not qualitatively affect the above results, but it is relevant.

Keywords: multinational enterprises; capacity precommitment; credibility; market preemption (search for similar items in EconPapers)
JEL-codes: F23 L12 (search for similar items in EconPapers)
Pages: 22
Date: 1993-06-01
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:1993018

Access Statistics for this paper

More papers in LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) Place Montesquieu 3, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Virginie LEBLANC ().