IDEAS home Printed from
   My bibliography  Save this article

Export versus FDI: Learning through propinquity


  • Anthony Creane
  • Kaz Miyagiwa


This paper considers the strategic role learning plays on the choice between FDI and export under demand and cost uncertainty. FDI allows a foreign firm to learn local demand, which is beneficial. However, as it buys inputs from the same local input markets as the rival home firm, two firms’ costs become perfectly correlated, which we prove harmful to the foreign firm. Thus, the interplay of the demand acquisition and the cost correlation effect affects FDI decisions. We show that FDI is more likely to occur when firms produce more differentiated goods and that FDI almost always reduces host country welfare.

Suggested Citation

  • Anthony Creane & Kaz Miyagiwa, 2020. "Export versus FDI: Learning through propinquity," International Journal of Economic Theory, The International Society for Economic Theory, vol. 16(4), pages 361-379, December.
  • Handle: RePEc:bla:ijethy:v:16:y:2020:i:4:p:361-379
    DOI: 10.1111/ijet.12198

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ijethy:v:16:y:2020:i:4:p:361-379. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.