Playing away to win at home

Dermot Leahy and Stephen Pavelin

Journal of Economics and Business, 2008, vol. 60, issue 5, 455-468

Abstract: This paper presents a model of the interaction between two rival firms based in the same country. Each firm must decide how to serve a foreign market (export or foreign production) and how much to invest in a corporate-wide asset that reduces production costs and/or augments the willingness-to-pay for their product. In this scenario, the firms' foreign direct investment decisions are interdependent. Furthermore, strategic motives for FDI relate to a firm's domestic, as well as foreign, market profits. One possibility is that a firm sets up overseas production even though its foreign market profits would be higher by exporting.

Keywords: Foreign; direct; investment; Multinational; firm; R&; D; Oligopoly (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (3)

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Working Paper: Playing away to win at home (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:60:y:2008:i:5:p:455-468

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