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FDI as a signal of quality

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Author Info

  • Katayama, Seiichi
  • Miyagiwa, Kaz

Abstract

A new-product firm's entry strategy into foreign markets is considered. We show that, when product quality is unknown, a new-product firm may choose FDI over exporting to signal quality even if exporting is more cost-effective.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 103 (2009)
Issue (Month): 3 (June)
Pages: 127-130

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Handle: RePEc:eee:ecolet:v:103:y:2009:i:3:p:127-130

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Foreign direct investment (FDI) Exporting Unknown quality Signaling;

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References

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  1. Bagwell, Kyle, 2007. "The Economic Analysis of Advertising," Handbook of Industrial Organization, Elsevier.
  2. Paul R. Milgrom & John Roberts, 1984. "Price and Advertising Signals of Product Quality," Cowles Foundation Discussion Papers 709, Cowles Foundation for Research in Economics, Yale University.
  3. Bagwell, Kyle, 1991. "Optimal Export Policy for a New-Product Monopoly," American Economic Review, American Economic Association, vol. 81(5), pages 1156-69, December.
  4. Wolfgang Mayer, 1984. "The Infant-Export Industry Argument," Canadian Journal of Economics, Canadian Economics Association, vol. 17(2), pages 249-69, May.
  5. Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004. "Export versus FDI with Heterogeneous Firms," Scholarly Articles 3229098, Harvard University Department of Economics.
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