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Platform Investments and Volatility Exchange Rates: Direct Investment in the U.S. by Japanese Electronic Companies

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  • Kogut, Bruce
  • Chang, Sea Jin
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    Abstract

    This study examines the effects of previous entry on the subsequent decisions of Japanese electronics companies to invest in the United States. By gathering data at the firm level, the empirical analysis provides a fine-grain sorting out of firm and industry effects on foreign direct investment decisions. The findings show that investment behavior is highly heterogeneous across firms and reflects their individual technological capabilities and their history of previous investments in the United States. Real exchange rate levels are also important. The results suggest that initial investments serve as platforms for subsequent entry, with the timing of entry triggered by movements in real exchange rates. Copyright 1996 by MIT Press.

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    Bibliographic Info

    Article provided by MIT Press in its journal Review of Economics & Statistics.

    Volume (Year): 78 (1996)
    Issue (Month): 2 (May)
    Pages: 221-31

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    Handle: RePEc:tpr:restat:v:78:y:1996:i:2:p:221-31

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    Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535

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    Cited by:
    1. Matthias Busse & Carsten Hefeker & Signe Nelgen, 2010. "Foreign Direct Investment and Exchange Rate Regimes," MAGKS Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 201015, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    2. Blonigen, Bruce A., 2002. "Tariff-jumping antidumping duties," Journal of International Economics, Elsevier, Elsevier, vol. 57(1), pages 31-49, June.
    3. Andersen, Torben Juul, 2012. "Multinational risk and performance outcomes: Effects of knowledge intensity and industry context," International Business Review, Elsevier, Elsevier, vol. 21(2), pages 239-252.
    4. Brada, Josef C. & Kutan, Ali M. & Yigit, Taner M., 2004. "The effects of transition and political instability on foreign direct investment inflows: Central Europe and the Balkans," ZEI Working Papers, ZEI - Center for European Integration Studies, University of Bonn B 33-2004, ZEI - Center for European Integration Studies, University of Bonn.
    5. Baek, H. Young & Kwok, Chuck C. Y., 2002. "Foreign exchange rates and the corporate choice of foreign entry mode," International Review of Economics & Finance, Elsevier, Elsevier, vol. 11(2), pages 207-227, May.
    6. Seaman, Bruce A. & Moore, Robert E., 2003. "International trade and economic development: Can foreign direct investment be predicted?," MPRA Paper 10510, University Library of Munich, Germany.
    7. Bruce A. Blonigen & Christopher J. Ellis & Dietrich Fausten, 2000. "Industrial Groupings and Strategic FDI: Theory and Evidence," NBER Working Papers 8046, National Bureau of Economic Research, Inc.
    8. Mariko Sakakibara & Hideki Yamawaki, 2008. "What determines the profitability of foreign direct investment? A subsidiary-level analysis of Japanese multinationals," Managerial and Decision Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 29(2-3), pages 277-292.
    9. Bruce Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," Atlantic Economic Journal, International Atlantic Economic Society, International Atlantic Economic Society, vol. 33(4), pages 383-403, December.
    10. Sangcheol Song, 2014. "Entry mode irreversibility, host market uncertainty, and foreign subsidiary exits," Asia Pacific Journal of Management, Springer, Springer, vol. 31(2), pages 455-471, June.
    11. Gilroy, Bernard Michael & Lukas, Elmar, 2002. "The New Agenda for FDI: Evidence from South Korea and Germany," MPRA Paper 17970, University Library of Munich, Germany.
    12. Axarloglou, Kostas & Kouvelis, Panos, 2007. "Hysteresis in adjusting the ownership structure of foreign subsidiaries," International Business Review, Elsevier, Elsevier, vol. 16(4), pages 494-506, August.
    13. Singla, Chitra & George, Rejie, 2013. "Internationalization and performance: A contextual analysis of Indian firms," Journal of Business Research, Elsevier, Elsevier, vol. 66(12), pages 2500-2506.
    14. Bruce A. Blonigen & KaSaundra Tomlin, 1999. "Size and Growth of Japanese Plants in the United States," NBER Working Papers 7275, National Bureau of Economic Research, Inc.
    15. Lee, Bong-Soo & Min, Byung S., 2011. "Exchange rates and FDI strategies of multinational enterprises," Pacific-Basin Finance Journal, Elsevier, Elsevier, vol. 19(5), pages 586-603, November.

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