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Uncertain productivity growth and the choice between FDI and export

Erdal Yalcin and Davide Sala ()

No 19/2012, Discussion Papers on Economics from University of Southern Denmark, Department of Economics

Abstract: With aggregate sales by foreign affiliates exceeding world exports, determinants of FDI patterns have received great attention, while the timing of their surge has been understudied. Recent evidence indicates that transportation costs of goods have fallen too little to explain these figures based on the proximity-concentration trade-off argument alone. Contextually, other changes have occurred: in particular, the uncertainty that firms bear has increased. Enriching the classical choice problem of a multinational firm with insights from the investment literature, we show that increased uncertainty along with the sizable fixed costs characterizing engagements on international markets can explain specific FDI patterns.

Keywords: Proximity-concentration hypothethis; stochastic processes; real option (search for similar items in EconPapers)
JEL-codes: F17 F21 F23 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2012-09-07
New Economics Papers: this item is included in nep-int
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Related works:
Journal Article: Uncertain Productivity Growth and the Choice between FDI and Export (2014) Downloads
Working Paper: Uncertain Productivity Growth and the Choice between FDI and Export (2010) Downloads
Working Paper: Uncertain Productivity Growth and the Choice between FDI and Export (2009) Downloads
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