Optimal Entry Mode for Multinationals with Possibility of Technology Diffusion

Nilanjana Mitra () and Tanmoyee Banerjee (Chatterjee) ()
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Nilanjana Mitra: Susil Kar College
Tanmoyee Banerjee (Chatterjee): Jadavpur University
Authors registered in the RePEc Author Service: Tanmoyee Banerjee (Chatterjee) ()

Chapter 3 in Analytical Issues in Trade, Development and Finance, 2014, pp 37-62 from Springer

Abstract: Abstract The chapter tries to evaluate the optimal entry mode of a multinational company (MNC) that is choosing among export, fragmented production structure with assembly-line foreign direct investment (FDI) in a less-developed country (LDC) or complete production in an LDC with FDI. The results show that if the intellectual property rights (IPR) restriction is strong and the plant installation cost in an LDC is below a certain critical level, then the MNC chooses complete LDC production with FDI over assembly-line FDI, where the model assumes that a fake producer can copy the product if complete production takes place in the LDC. In such a situation, the government will choose to protect IPR only under some sufficient conditions; otherwise, no monitoring is the optimal strategy of the government and the MNC will choose the strategy of fragmented production structure and assembly-line FDI will take place in the LDC.

Keywords: Export; Assembly line FDI; FDI with complete production; IPR protection (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:spr:isbchp:978-81-322-1650-6_3

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DOI: 10.1007/978-81-322-1650-6_3

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