Export-supporting FDI

Sebastian Krautheim

Canadian Journal of Economics, 2013, vol. 46, issue 4, 1571-1605

Abstract: A large fraction of affiliates owned by multinational manufacturing companies operate in the wholesale and retail sectors. This paper proposes a model of trade, horizontal FDI, and export-supporting FDI (ESFDI). ESFDI reduces distribution costs abroad, while production remains at home. ESFDI introduces a complementarity between trade and FDI, while trade and production abroad remain substitutes. German firmlevel FDI data show that ESFDI is quantitatively relevant. In line with the model, most firms choose either ESFDI or horizontal FDI in a given market; ESFDI is chosen by smaller parents and is strongest when distance from Germany is low.

JEL-codes: F12 F23 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (26)

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Related works:
Working Paper: Export-Supporting FDI (2007)
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