Uncertain Productivity Growth and the Choice between FDI and Export

Erdal Yalcin and Davide Sala ()

Review of International Economics, 2014, vol. 22, issue 1, 189-208

Abstract: While determinants of FDI patterns have received widespread attention, the timing of their surge remains largely unexplained. According to the proximity–concentration trade-off argument, a surge in FDI in times of decaying international transportation costs seemingly represents a paradox. Besides transportation costs, other factors have contextually changed: in particular, the uncertainty that firms bear has increased. Enriching the classical choice problem of a multinational firm with insights from the literature on investment under uncertainty, we illustrate how different types of uncertainty determine the timing and optimal entry mode (i.e. FDI or export) of a multinational enterprise into a new market.

Date: 2014
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Related works:
Working Paper: Uncertain productivity growth and the choice between FDI and export (2012)
Working Paper: Uncertain Productivity Growth and the Choice between FDI and Export (2010)
Working Paper: Uncertain Productivity Growth and the Choice between FDI and Export (2009)
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