EXPORT, INVEST OR PARTNER? THE IMPACT OF FREE TRADE AGREEMENTS ON US FIRMS’ INTERNATIONAL ENTRY METHODS

Austin Hayes and Jovan Vojnovic
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Austin Hayes: University of Edinburgh, U.K.
Jovan Vojnovic: University of Edinburgh, U.K.

Journal of Economic Development, 2026, vol. 51, issue 3, 19-59

Abstract: The choices available to firms entering foreign markets are complex yet crucial, and while Free Trade Agreements (FTAs) can provide essential support, the value of these remains unclear. This paper therefore evaluates the impact of FTAs on firms’ choice of entry into foreign markets. Using an extensive panel dataset of 137 trading partners of the United States, linear and non-linear multivariate regressions are employed to evaluate the separate relationships, while a non-parametric estimation is used to compare evidence across method of entry. Results reveal that FTAs actively promote exporting at the expense of investing and partnering. An interconnected relationship between methods is inferred and linked through their dependence on recipients’ cultural and societal differences to the US. Consequently, the recognised benefits of FTAs may be more nuanced, promoting exporting at the cost of other investment types.

Keywords: Free Trade Agreements; Foreign Direct Investment; Exports; Joint Ventures; Entry Mode; Gravity Model; Cultural Distance; Panel Data (search for similar items in EconPapers)
JEL-codes: C23 F13 F14 F15 F21 F23 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ris:jecdev:023659

DOI: 10.35866/caujed.2026.51.3.002

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