Market Size and the Survival of Foreign-owned Firms
Rodney Falvey (),
Sir David Greenaway () and
Zhihong Yu ()
Discussion Papers from University of Nottingham, GEP
We develop a general equilibrium model with heterogeneous firms and Foreign Direct Investment (FDI) cost uncertainty and investigate the survival of foreign-owned firms. The survival probabilities of foreign-owned firms depend on firm-level characteristics such as productivity and host country characteristics such as market size. We show that a foreign-owned firm will be less likely to be shut down when its parent firm’s productivity is higher and its indigenous competitors are less productive. Whilst a larger market size will always reduce the survival probability of indigenous firms, it can lead to a higher survival probability for foreign-owned firms if their parent firms are sufficiently productive.
Keywords: FDI; heterogeneous firms; market size (search for similar items in EconPapers)
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Journal Article: Market Size and the Survival of Foreign-owned Firms (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:not:notgep:07/25
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