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

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: FIW Working Paper ; No. 12

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions ; Firm Behavior: Theory ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
• Subject: Exports ; Foreing Direct Investment ; Three Nations Model ; Bivariate Probit Estimation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Oberhofer, Harald ; Pfaffermayr, Michael
• Event: Veröffentlichung
• (who): FIW - Research Centre International Economics
• (where): Vienna
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/121013
• Last update: 10.03.2025, 11:44 AM CET