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Internalization and internationalization under copeting real options

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  • Fisch, Jan Hendrik
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    Abstract

    The theories of internalization and internationalization provide general factors of international market entry but are not precise about its timing. A model of waiting and growth options seizes the importance of flexibility to FDI decisions and centers the impact of uncertainty. The results of a panel study using aggregates of 5379 German entries to 22 countries suggest that uncertainty has a U-shaped influence on the probability of entry and a negative effect on the amount of capital whereas it leaves the share in capital unaffected. Investors seem to treat foreign subsidiaries as real options on internationalization but not on internalization. --

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    Bibliographic Info

    Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2006,15.

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    Date of creation: 2006
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    Handle: RePEc:zbw:bubdp1:4354

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    Keywords: Foreign Direct Investment; Market Entry Mode; Real Options; Uncertainty; Timing;

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    1. Falko Fecht & Kevin Huang & Antoine Martin, 2004. "Financial intermediaries, markets, and growth," Research Working Paper, Federal Reserve Bank of Kansas City RWP 04-02, Federal Reserve Bank of Kansas City.
    2. von Kalckreuth, Ulf, 2005. "A "wreckers theory" of financial distress," Discussion Paper Series 1: Economic Studies 2005,40, Deutsche Bundesbank, Research Centre.
    3. Koetter, M. & Bos, J.W.B. & Heid, F. & Kolari, J.W. & Kool, C.J.M. & Porath, D., 2007. "Accounting for distress in bank mergers," Journal of Banking & Finance, Elsevier, Elsevier, vol. 31(10), pages 3200-3217, October.
    4. Szilagyi, Jan & Hilscher, Jens & Campbell, John, 2008. "In Search of Distress Risk," Scholarly Articles 3199070, Harvard University Department of Economics.
    5. Slacalek, Jirka & Fritsche, Ulrich & Dovern, Jonas & Döpke, Jörg, 2005. "European inflation expectations dynamics," Discussion Paper Series 1: Economic Studies 2005,37, Deutsche Bundesbank, Research Centre.
    6. Yadong Luo, 1998. "Timing of Investment and International Expansion Performance in China," Journal of International Business Studies, Palgrave Macmillan, vol. 29(2), pages 391-407, June.
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