Regional economic integration and multinational firm strategies

Sanghyun Hwang and Seungrae Lee

The Journal of International Trade & Economic Development, 2015, vol. 24, issue 7, 968-1013

Abstract: This paper analyzes the effects of regional economic integrations on investment patterns among multinational firms. We develop a model in which heterogeneous firms decide on the optimal foreign direct investment (FDI) strategies for serving trade-integrated regions consisting of asymmetric countries: developed and developing nations. Following reduced trade costs within the trade-integrated region, our model shows that integrating into a regional economic zone affects firms with relatively low productivity levels to enter developing nation within the region via complex FDI -- a firm activity of engaging in multiple types of FDI. Specifically, we show that depending on the size of the region respective to the home country, complex FDI involves different investment patterns. Using Korean firm- and plant-level data, we specify a binary choice model to link firms’ choice of FDI strategies with their productivity levels and trade-integrated regions. Our empirical results are consistent with the theoretical implications.

Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/09638199.2014.987681 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:jitecd:v:24:y:2015:i:7:p:968-1013

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RJTE20

DOI: 10.1080/09638199.2014.987681

Access Statistics for this article

The Journal of International Trade & Economic Development is currently edited by Pasquale Sgro, David E.A. Giles and Charles van Marrewijk

More articles in The Journal of International Trade & Economic Development from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().