Market Size and the Survival of Foreign-owned Firms
AbstractWe develop a general equilibrium model with heterogeneous firms and Foreign Direct Investment (FDI) cost uncertainty and investigate the survival of foreign-owned firms. The survival probabilities of foreign-owned firms depend on firm-level characteristics such as productivity and host country characteristics such as market size. We show that a foreign-owned firm will be less likely to be shut down when its parent firm’s productivity is higher and its indigenous competitors are less productive. Whilst a larger market size will always reduce the survival probability of indigenous firms, it can lead to a higher survival probability for foreign-owned firms if their parent firms are sufficiently productive.
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Bibliographic InfoPaper provided by University of Nottingham, GEP in its series Discussion Papers with number 07/25.
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Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
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FDI; heterogeneous firms; market size;
Other versions of this item:
- Rod Falvey & David Greenaway & Zhihong Yu, 2007. "Market Size and the Survival of Foreign-owned Firms," The Economic Record, The Economic Society of Australia, vol. 83(s1), pages S23-S34, 09.
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