Strategic investments and multinational firms under oligopoly
AbstractWe have developed a simple oligopoly model in which foreign direct investment (FDI) decisions are determined in an endogenous fashion. There is a host oligopoly facing competition from a foreign oligopoly in the form of either foreign investment or exports. Then, we propose a multi-stage game to stress the role played by the interactions among foreign rival firms´ decisions, and we identify some of the determinants of a switch from an exporting strategy to an FDI strategy. A delay in the investment is more likely found for big enough country-specific fixed costs and low values of the oligopoly profitability. Our model provides a theoretical basis which leads to predictions in line with previous empirical studies.
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Bibliographic InfoPaper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie EC with number 1997-16.
Length: 17 pages
Date of creation: Jan 1997
Date of revision:
Publication status: Published by Ivie
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
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