EXPORTS VERSUS FDI IN SMITH-MOTTA FRAMEWORK

Andrzej Cieślik

Equilibrium. Quarterly Journal of Economics and Economic Policy, 2016, vol. 11, issue 2, 189-218

Abstract: In this paper we study the choice between exporting and foreign direct investment (FDI) in the Smith-Motta duopoly framework. First, we identify the conditions necessary for exporting and FDI, depending on the costs of exporting and the cost of foreign investment. Then, we discuss various proximity-concentration tradeoffs. Finally, we demonstrate that six possible types of equilibriums may emerge depending on various combinations of the key parameters of the model. These equilibriums include: a monopoly FDI equilibrium, a monopoly exporting equilibrium, a domestic monopoly equilibrium, a duopoly FDI equilibrium, a duopoly exporting equilibrium, and no entry equilibrium.

Keywords: exporting; foreign direct investment; proximity-concentration tradeoff (search for similar items in EconPapers)
JEL-codes: F23 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:pes:ierequ:v:11:y:2016:i:2:p:189-218

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