FDI versus Exports. Substitutes or Complements? A Three Nation Model and Empirical Evidence

Harald Oberhofer and Michael Pfaffermayr

Working Papers from Faculty of Economics and Statistics, Universität Innsbruck

Abstract: There are two main options for companies to serve foreign markets: exports and foreign direct investment (FDI). Based on the Helpman, Melitz and Yeaple (2004) model for two host countries this paper derives a clear theoretical prediction for the decision between both strategies. A bivariate probit model is estimated using AMADEUS database to analyse the probability of using one or the other strategy. The empirical evidence indicates that a considerable number of companies use a combination of both strategies to serve foreign markets, which is in line with the analyzed three country model.

Keywords: Exports; Foreing Direct Investment; Three Nation Model; Bivariate Probit Estimation (search for similar items in EconPapers)
JEL-codes: C35 D21 F12 (search for similar items in EconPapers)
Pages: 32
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:inn:wpaper:2007-28

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