The Choice Between Trade, Foreign Direct Investment and Licensing

Alan Rugman

Chapter 3 in Inside the Multinationals 25th Anniversary Edition, 2006, pp 34-55 from Palgrave Macmillan

Abstract: Abstract This chapter examines the choice between exporting, foreign direct investment and licensing as methods of servicing foreign markets. The choice is made by a multinational enterprise (MNE), assumed to possess a firm specific advantage in knowledge, technology or some other special asset embodied within the organization of the firm. Alternative methods of determination of the optimal modality are presented. This form of presentation is used here since there are as yet unresolved problems in the solution of some of these models. It is advisable to provide as much information as possible so that a definitive model may emerge later from these pioneering attempts at formalizing the cost conditions affecting each modality.

Keywords: Foreign Direct Investment; Internal Market; Foreign Market; Foreign Firm; Entry Mode (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-62516-7_3

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DOI: 10.1057/9780230625167_3

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