Cost heterogeneity and the destination of Japanese foreign direct investment: A theoretical and empirical analysis
AbstractThis paper first of all develops a Cournot oligopolistic model with heterogeneous firms to examine each firm's choice between export-oriented foreign direct investments (FDI) and FDI to serve the host-country market. It is shown that there exist a critical level of efficiency such that all firms below that level choose the former and those above it the latter. The hypothesis is tested using firm-level data on 118,300 Japanese firms covering the entire manufacturing sector. Multinomial logit estimates strongly support our theoretical findings.
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Bibliographic InfoArticle provided by Elsevier in its journal Japan and the World Economy.
Volume (Year): 23 (2011)
Issue (Month): 3 ()
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Web page: http://www.elsevier.com/locate/inca/505557
Cost heterogeneity; Oligopoly; Foreign direct investment; Export-oriented FDI; FDI destination;
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