Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
957964 | Journal of Economics and Business | 2008 | 14 Pages |
Abstract
This paper presents a model of the interaction between two rival firms based in the same country. Each firm must decide how to serve a foreign market (export or foreign production) and how much to invest in a corporate-wide asset that reduces production costs and/or augments the willingness-to-pay for their product. In this scenario, the firms’ foreign direct investment decisions are interdependent. Furthermore, strategic motives for FDI relate to a firm's domestic, as well as foreign, market profits. One possibility is that a firm sets up overseas production even though its foreign market profits would be higher by exporting.
Related Topics
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Authors
Dermot Leahy, Stephen Pavelin,