The timing and probability of FDI: an application to US multinational enterprises
AbstractAn 'option-pricing' model is employed to analyse the timing of FDI. Assuming that the firm's profits are determined by the attractiveness of both the home and foreign countries, and that attractiveness follows a Brownian motion, an optimal trigger value of FDI is derived. The model shows that, contrary to the NPV rule, FDI entry should be delayed the greater the uncertainty of attractiveness in both locations. Another important result is that MNEs do not regard FDI as a risk-diversification tool. The results of the model were then tested empirically with US FDI data, using labour costs as a proxy for (the reciprocal of) attractiveness. The results support the findings of the analytical model.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics.
Volume (Year): 37 (2005)
Issue (Month): 4 ()
Contact details of provider:
Web page: http://www.tandfonline.com/RAEC20
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Axel Dreher & Peter Nunnenkamp & Krishna Chaitanya Vadlamannati, 2011.
"The Role of Country-of-origin Characteristics for Foreign Direct Investment and Technical Cooperation in Post-reform India,"
Kiel Working Papers
1708, Kiel Institute for the World Economy.
- Dreher, Axel & Nunnenkamp, Peter & Vadlamannati, Krishna Chaitanya, 2013. "The Role of Country-of-Origin Characteristics for Foreign Direct Investment and Technical Cooperation in Post-Reform India," World Development, Elsevier, vol. 44(C), pages 88-109.
- Axel Dreher & Peter Nunnenkamp & Krishna Chaitanya Vadlamannati, 2011. "The Role of Country-of-origin Characteristics for Foreign Direct Investment and Technical Cooperation in Post-reform India," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 81, Courant Research Centre PEG.
- Axel Dreher & Peter Nunnenkamp & Krishna Chaitanya Vadlamannati, 2011. "The Role of Country-of-origin Characteristics for Foreign Direct Investment and Technical Cooperation in Post-reform India," KOF Working papers 11-283, KOF Swiss Economic Institute, ETH Zurich.
- Henning M�hlen & Peter Nunnenkamp, 2011.
"FDI by early movers, followers and latecomers: timing of entry by German firms during transition in the Czech Republic,"
Applied Economics Letters,
Taylor & Francis Journals, vol. 18(18), pages 1729-1734, December.
- Henning Mühlen & Peter Nunnenkamp, 2009. "FDI by Early Movers, Followers and Latecomers: Timing of Entry by German Firms during Transition in the Czech Republic," Kiel Working Papers 1571, Kiel Institute for the World Economy.
- Felipa de Mello-Sampayo & Sofia de Sousa-Vale & Francisco Camões, 2008.
"Delaying the Timing of Offshoring Low-Skilled Tasks,"
Working Papers Series 1
ercwp1208, ISCTE-IUL, Business Research Unit (BRU-IUL).
- de Mello-Sampayo, Felipa & de Sousa-Vale, Sofia & Camões, Francisco, 2010. "Delaying the timing of offshoring low-skilled tasks," Economic Modelling, Elsevier, vol. 27(5), pages 951-958, September.
- Luís Francisco Aguiar-Conraria & Gulamhussen, Mohamed Azzim, 2006. "Foreign Direct Investment in Brazil and Home Country Risk," NIPE Working Papers 7/2006, NIPE - Universidade do Minho.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.