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Service characteristics and the choice between exports and FDI: Evidence from Belgian firms

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  • Leo Sleuwaegen

    (MSI, KU Leuven , Belgium, Naamsestraat 69, 3000 B Leuven)

  • Peter M. Smith

    (MSI, KU Leuven , Belgium, Naamsestraat 69, 3000 B Leuven)

Abstract

The decision to serve foreign markets through exports or foreign direct investment (FDI) has been studied within proximity-concentration models of location, mainly in the context of trade in goods. This paper adapts these models to account for the specific nature of services that are traded across borders. We show how services can be characterized by a bundle of attributes that collectively describe the service. These attributes are then tested to show how they affect the choice between exports and FDI using service-level data for firms in Belgium selling services abroad. Three different types of characteristic are shown to affect the export versus FDI decision: intangibility, the searchexperience-credence framework and the requirement for either the supplier or the client to physically move to the point of production.

Suggested Citation

  • Leo Sleuwaegen & Peter M. Smith, 2020. "Service characteristics and the choice between exports and FDI: Evidence from Belgian firms," Working Paper Research 385, National Bank of Belgium.
    • Handle: RePEc:nbb:reswpp:202007-385
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    References listed on IDEAS

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    Cited by:

    1. Kyvik Nordås, Hildegunn, 2023. "Services in the India-EU Free Trade Agreement," Working Papers 2023:5, Örebro University, School of Business.
    2. Ivan Deseatnicov & Konstantin Kucheryavyy & Kyoji Fukao, . "Exports, trade costs and FDI entry: evidence from Japanese firms," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.

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    More about this item

    Keywords

    Services; International Trade; Exports; Foreign Direct Investment; Service characteristics.;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • M16 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - International Business Administration
    • L8 - Industrial Organization - - Industry Studies: Services

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