FDI as a Signal of Quality
AbstractThis paper considers a new-product firm's choice between exporting and foreign direct investment (FDI) to access foreign markets. We find that, when quality is unknown to buyers, the firm may choose FDI over exporting to signal quality, even though FDI is a costlier mode of access than exporting. We then use the model to study the effect of local labor requirement policy imposed by the host country government.
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Bibliographic InfoPaper provided by Department of Economics, Emory University (Atlanta) in its series Emory Economics with number 0706.
Date of creation: Mar 2007
Date of revision:
Other versions of this item:
- NEP-ALL-2007-07-07 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004.
"Export versus FDI with Heterogeneous Firms,"
3229098, Harvard University Department of Economics.
- Milgrom, Paul & Roberts, John, 1986.
"Price and Advertising Signals of Product Quality,"
Journal of Political Economy,
University of Chicago Press, vol. 94(4), pages 796-821, August.
- Kyle Bagwell, 2005.
"The Economic Analysis of Advertising,"
0506-01, Columbia University, Department of Economics.
- Wolfgang Mayer, 1984. "The Infant-Export Industry Argument," Canadian Journal of Economics, Canadian Economics Association, vol. 17(2), pages 249-69, May.
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