Platform Investments and Volatility Exchange Rates: Direct Investment in the U.S. by Japanese Electronic Companies

Bruce Kogut and Sea Jin Chang

The Review of Economics and Statistics, 1996, vol. 78, issue 2, 221-31

Abstract: This study examines the effects of previous entry on the subsequent decisions of Japanese electronics companies to invest in the United States. By gathering data at the firm level, the empirical analysis provides a fine-grain sorting out of firm and industry effects on foreign direct investment decisions. The findings show that investment behavior is highly heterogeneous across firms and reflects their individual technological capabilities and their history of previous investments in the United States. Real exchange rate levels are also important. The results suggest that initial investments serve as platforms for subsequent entry, with the timing of entry triggered by movements in real exchange rates. Copyright 1996 by MIT Press.

Date: 1996
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