FDI versus Exports Substitutes or Complements? A Three Nations Model and Empirical Evidence
Harald Oberhofer () and
Michael Pfaffermayr ()
No 12, FIW Working Paper series from FIW
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 Nations Model; Bivariate Probit Estimation (search for similar items in EconPapers)
JEL-codes: C35 D21 F12 (search for similar items in EconPapers)
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Working Paper: FDI versus Exports. Substitutes or Complements? A Three Nation Model and Empirical Evidence
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Persistent link: https://EconPapers.repec.org/RePEc:wsr:wpaper:y:2008:i:012
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