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Strategic Foreign Direct Investment in Developing Countries under Demand Uncertainty: Commitment vs. Flexibility

Author

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  • Hyun , Hea-Jung

    (Kyung Hee University)

Abstract

The paper analyzes the effect of expected future demand on the investment decisions of multinational enterprises. In particular, I explore the issue of the timing of switching between exporting and FDI in the host developing country and explicitly incorporate the firm's attitude toward risk in the model. The model demonstrates that the optimal time for switching to FDI depends on the expected future demand and the degree of its uncertainty.

Suggested Citation

  • Hyun , Hea-Jung, 2012. "Strategic Foreign Direct Investment in Developing Countries under Demand Uncertainty: Commitment vs. Flexibility," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 16(1), pages 25-66, March.
    • Handle: RePEc:ris:eaerev:0078
    DOI: 10.11644/KIEP.JEAI.2012.16.1.242
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    More about this item

    Keywords

    Foreign Direct Investment; Developing Countries; Uncertainty; Switching Time; Commitment; Flexibility;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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