FDI in Post-Production Services and Product Market Competition

Jota Ishikawa, Hodaka Morita () and Hiroshi Mukunoki

Global COE Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: Post-production services, such as sales, distribution, and maintenance, comprise a crucial element of business activity. A foreign firm faces a higher cost to perform such services than its domestic rival because of the lack of proximity to customers. We explore an international duopoly model in which a foreign firm can reduce its cost for post-production services by foreign direct investment (FDI), or alternatively can outsource such services to its domestic rival. Trade liberalization, if not accompanied by liberalization of service FDI, can hurt domestic consumers and decrease world welfare, but the negative welfare impacts can be mitigated and eventually turned into positive ones as service FDI is also liberalized. This finding yields important policy implications, given the reality that the progress of liberalization in service sectors is limited compared to the substantial progress already made in trade liberalization.

Keywords: post-production services; trade liberalization; FDI; outsourcing; international oligopoly (search for similar items in EconPapers)
JEL-codes: F12 F13 F21 F23 (search for similar items in EconPapers)
Date: 2008-10
New Economics Papers: this item is included in nep-com, nep-int and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: FDI in post-production services and product market competition (2010)
Working Paper: FDI in Post-Production Services and Product Market Competition (2010)
Working Paper: FDI in Post-Production Services and Product Market Competition (2010)
Working Paper: FDI in Post-Production Services and Product Market Competition (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:hst:ghsdps:gd08-004

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