Playing Away to Win at Home: A Strategic Model of the Choice Between Exporting and Multinational Production with Cost-Reducing R&D Expenditures

Stephen Pavelin

University of East Anglia Discussion Papers in Economics from School of Economics, University of East Anglia, Norwich, UK.

Abstract: The strategic literature on the choice between exporting and multinational production has looked only at the interaction between either (i) a single potential multinational (based in country A) and a single (or set of) domestic firm(s) (based in country B) or (ii) two potential MNEs based in different countries (one in A and one in B). This paper departs from that structure to look at the interaction between two firms based in the same country, each of which faces the export, MNE choice concerning the servicing of a second country's market. Furthermore, firms have a choice over investment in a new technology which allows a corporate wide reduction in variable costs (eg cost reducing R&D). A two firm, leader-follower model is employed and it is found that under certain parameterisations we obtain a non-monotonic relationship between tariffs and multinationality. It is also possible that a firm will choose to be a multinational even though they would receive higher profits from the foreign market were they to export. They do so in order to deter their rivals from investing in the new, cost reducing technology.

Keywords: TRANSNATIONAL CORPORATIONS; PRODUCTION (search for similar items in EconPapers)
JEL-codes: F23 L11 L23 M11 O32 (search for similar items in EconPapers)
Pages: 24 pages
Date: 1997
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:uea:papers:9706

Ordering information: This working paper can be ordered from
Reception, School of Economics, University of East Anglia, Norwich Research Park, Norwich, NR4 7TJ, UK
eco.reception@uea.ac.uk

Access Statistics for this paper

More papers in University of East Anglia Discussion Papers in Economics from School of Economics, University of East Anglia, Norwich, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Cara Liggins (eco.reception@uea.ac.uk).