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)
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