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FDI versus Exports: Multiple Host Countries and Empirical Evidence

Author

Listed:
  • Oberhofer, Harald

    (University of Salzburg)

  • Pfaffermayr, Michael

    (Department of Economics and Statistics, University of Innsbruck)

Abstract

There are two main options for companies to serve foreign markets: exports and foreign direct investment (FDI). Based on the Helpman, Melitz and Yeaple (2004) model for multiple host countries this paper derives a clear theoretical prediction for the decision between both strategies. A bivariate probit model is estimated using a large data set of European companies to analyze the probability of using one or the other strategy. The empirical evidence indicates that more productive firms less (more) probably use the export (FDI) strategy to serve foreign markets. Moreover, a considerable number of companies use a combination of both strategies to serve foreign markets, which is in line with a multiple country model.

Suggested Citation

  • Oberhofer, Harald & Pfaffermayr, Michael, 2011. "FDI versus Exports: Multiple Host Countries and Empirical Evidence," Working Papers in Economics 2011-3, University of Salzburg.
  • Handle: RePEc:ris:sbgwpe:2011_003
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    Cited by:

    1. Filomena Pietrovito & Alberto Franco Pozzolo & Luca Salvatici, 2016. "Internationalization choices: an ordered probit analysis at industry level," Empirical Economics, Springer, vol. 50(2), pages 561-594, March.
    2. Tamar Khachaturian & Sarah Oliver, 2023. "Intangible trade: Understanding the relationship between trade barriers and mode of supply in services sectors," The World Economy, Wiley Blackwell, vol. 46(5), pages 1189-1234, May.
    3. Thomas Url, 2018. "Die Folgen staatlicher Wechselbürgschaften und Beteiligungsgarantien für Inlandsbeschäftigung und Leistungsbilanz," WIFO Studies, WIFO, number 61057, Juni.
    4. Chih-Fan Lin, 2016. "Does Chinese OFDI really promote export?," China Finance and Economic Review, Springer, vol. 4(1), pages 1-16, December.
    5. Cho, Janghee & Chun, Hyunbae & Hur, Jung, 2014. "Choosing multiple offshoring strategies: Determinants and complementarity," Journal of the Japanese and International Economies, Elsevier, vol. 34(C), pages 42-57.
    6. Joachim Wagner, 2016. "International Trade and Firm Performance: A Survey of Empirical Studies since 2006," World Scientific Book Chapters, in: Microeconometrics of International Trade, chapter 2, pages 43-87, World Scientific Publishing Co. Pte. Ltd..
    7. Liu, Zhiyuan & Xu, Yue & Wang, Peijie & Akamavi, Raphaël, 2016. "A pendulum gravity model of outward FDI and export," International Business Review, Elsevier, vol. 25(6), pages 1356-1371.
    8. Prajukta Tripathy & Pragyanrani Behera & Bikash Ranjan Mishra, 2023. "Study of linkages between productivity, export, and outward foreign direct investment: An empirical perspective of Indian manufacturing industries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1527-1548, April.
    9. Pinuccia Calia & Maria Ferrante, 2013. "How do firms combine different internationalisation modes? A multivariate probit approach," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(4), pages 663-696, December.
    10. Sèna Kimm Gnangnon, 2022. "Does poverty deter foreign direct investment flows to developing countries?," International Journal of Economic Policy Studies, Springer, vol. 16(1), pages 297-330, February.
    11. Farrukh Suvankulov, 2015. "Revisiting National Border Effects in Foreign Trade in Goods of Canadian Provinces," Staff Working Papers 15-28, Bank of Canada.
    12. Haoyuan Ding & Kees G. Koedijk & Chang Li & Tong Qi, 2021. "The internationalisation of Chinese firms: Impact of FDI experience on export performance," The World Economy, Wiley Blackwell, vol. 44(12), pages 3609-3640, December.
    13. Aurora Teixeira & Cátia Coimbra, 2014. "The determinants of the internationalization speed of Portuguese university spin-offs: An empirical investigation," Journal of International Entrepreneurship, Springer, vol. 12(3), pages 270-308, September.
    14. Ronny Thomas & K. Narayanan, 2016. "Outward FDI, Exports and Technological Efforts: A Study of Indian Manufacturing Firms," Working Papers id:11383, eSocialSciences.
    15. Iza Lejárraga & Harald Oberhofer, 2015. "Performance of small- and medium-sized enterprises in services trade: evidence from French firms," Small Business Economics, Springer, vol. 45(3), pages 673-702, October.
    16. Gnangnon, Sèna Kimm & Iyer, Harish, 2021. "Effect of Aid for Trade and Foreign Direct Investment Inflows on the Utilization of Unilateral Trade Preferences offered by the QUAD countries," EconStor Preprints 238211, ZBW - Leibniz Information Centre for Economics.

    More about this item

    Keywords

    Heterogeneous Firms; Exports; Foreign Direct Investment; Multiple Host Countries; Bivariate Probit Estimation;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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