Financial advantage, outsourcing and FDI under wage uncertainty

E. Kwan Choi and Jai-Young Choi
Authors registered in the RePEc Author Service: Eun Kwan Choi

The North American Journal of Economics and Finance, 2013, vol. 24, issue C, 260-267

Abstract: This paper investigates outsourcing and foreign direct investment (FDI) decisions in North–South trade under conditions of wage uncertainty. The North has a financial advantage to raise capital, but the South has the advantage of low wages. If the expected outsourcing cost is lower than the in-house production cost, some outsourcing to a Southern firm is optimal. However, outsourcing to an FDI firm is superior to outsourcing to a Southern firm as well as in-house production. This finding is consistent with the rising foreign direct investment in China by Northern firms.

Keywords: Outsourcing; Foreign direct investment (search for similar items in EconPapers)
JEL-codes: F1 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Financial Advantage, Outsourcing and FDI Under Wage Uncertainity (2013)
Working Paper: Financial Advantage, Outsourcing and FDI under Wage Uncertainty (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:24:y:2013:i:c:p:260-267

DOI: 10.1016/j.najef.2012.10.002

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