Market Size and the Survival of Foreign-owned Firms
AbstractWe develop a general equilibrium model with heterogeneous firms and foreign direct investment 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. Although 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. Copyright © 2007 The Economic Society of Australia.
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Bibliographic InfoArticle provided by The Economic Society of Australia in its journal Economic Record.
Volume (Year): 83 (2007)
Issue (Month): s1 (09)
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Other versions of this item:
- Rod Falvey & David Greenaway & Zhihong Yu, . "Market Size and the Survival of Foreign-owned Firms," Discussion Papers 07/25, University of Nottingham, GEP.
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