IDEAS home Printed from https://ideas.repec.org/a/bla/reviec/v11y2003i5p845-859.html

Tariff Policy and the Foreign Entry Decision in the Presence of a Cost‐Based Informational Asymmetry

Author

Listed:
  • Mark G. Herander
  • Brad Kamp

Abstract

The paper demonstrates that the standard prediction on the relation between tariff rates and the mode of foreign entry—exports or direct investment—may not hold in the presence of incomplete information. A foreign firm lacks full information on the cost structure of an informed incumbent firm located in the domestic (potential) host country. Within a two‐period model, the local incumbent may behave in a manner which keeps the potential foreign entrant uninformed of its cost structure. In such a pooling equilibrium, the uninformed foreign firm either refrains from entering altogether or serves the host country via exports at tariff rates which would, otherwise under complete information, induce entry via direct investment. When entry mode is altered, other standard full‐information effects of trade policy may also no longer hold.

Suggested Citation

  • Mark G. Herander & Brad Kamp, 2003. "Tariff Policy and the Foreign Entry Decision in the Presence of a Cost‐Based Informational Asymmetry," Review of International Economics, Wiley Blackwell, vol. 11(5), pages 845-859, November.
    • Handle: RePEc:bla:reviec:v:11:y:2003:i:5:p:845-859
    DOI: 10.1046/j.1467-9396.2003.00421.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1046/j.1467-9396.2003.00421.x
    Download Restriction: no
    File URL: https://libkey.io/10.1046/j.1467-9396.2003.00421.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Edward M. Graham & Paul Krugman, 1995. "Foreign Direct Investment in the United States, 3rd Edition," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 52, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. GEORGANTZIS, Nikolaos & moner-colonques, Rafael & ORTS, Vicente & SEMPERE-MONERRIS, José J., 2012. "Theoretical and experimental insights on firms’ internationalization decisions under uncertainty," LIDAM Discussion Papers CORE 2012041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. 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.
    3. Hamid Beladi & Sugata Marjit & Avik Chakrabarti, 2009. "Tariff Jumping and Joint Ventures," Southern Economic Journal, John Wiley & Sons, vol. 75(4), pages 1256-1269, April.
    4. repec:tsa:wpaper:0006eco is not listed on IDEAS
    5. Hamid Beladi & Sugata Marjit & Avik Chakrabarti, 2006. "Tariff Jumping and Joint Ventures," Working Papers 0002, College of Business, University of Texas at San Antonio.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. M. T. Alguacil & V. Orts, 2003. "Inward Foreign Direct Investment and Imports in Spain," International Economic Journal, Taylor & Francis Journals, vol. 17(3), pages 19-38.
    2. Emizet, Kisangani N. F., "undated". "Zaire after Mobutu A Case of a Humanitarian Emergency," WIDER Working Papers 295326, United Nations University, World Institute for Development Economic Research (UNU-WIDER).
    3. repec:rre:publsh:v:33:y:2003:i:1:p:61-72 is not listed on IDEAS
    4. Dimitratos, Pavlos & Liouka, Ioanna & Young, Stephen, 2009. "Regional location of multinational corporation subsidiaries and economic development contribution: Evidence from the UK," Journal of World Business, Elsevier, vol. 44(2), pages 180-191, April.
    5. KH Zhang, 2001. "Does Foreign Direct Investment Promote Economic Growth? Evidence From East Asia And Latin America," Contemporary Economic Policy, Western Economic Association International, vol. 19(2), pages 175-185, April.
    6. Etzo, Ivan & Takaoka, Sumiko, 2016. "The impact of migrants on the cross-border M&A: Some evidence for Japan," MPRA Paper 71558, University Library of Munich, Germany.
    7. Alquist, Ron & Mukherjee, Rahul & Tesar, Linda, 2016. "Fire-sale FDI or business as usual?," Journal of International Economics, Elsevier, vol. 98(C), pages 93-113.
    8. Roger White, 2010. "Migration and International Trade," Books, Edward Elgar Publishing, number 13670, June.
    9. Asim Erdilek & Milton A. Wolf, 1996. "R&D activities and innovativeness of foreign-owned firms in Ohio," Assessing the Midwest Economy GL-6, Federal Reserve Bank of Chicago.
    10. Jirjahn, Uwe, 2024. "Corporate Globalization and Worker Representation," GLO Discussion Paper Series 1369, Global Labor Organization (GLO).
    11. Laura Alfaro, 2017. "Gains from Foreign Direct Investment: Macro and Micro Approaches," The World Bank Economic Review, World Bank, vol. 30(Supplemen), pages 2-15.
    12. Henneberger, Fred & Ziegler, Alexandre, 2001. "Internationalisierung der Dienstleistungserstellung: Konsequenzen fur den schweizerischen Arbeitsmarkt," Discussion Paper Series 26248, Hamburg Institute of International Economics.
    13. Cooper, Richard, 2004. "Is "Economic Power" a Useful and Operational Concept?," Scholarly Articles 3677050, Harvard University Department of Economics.
    14. Rahmi Cetin & Robert Ackrill, 2006. "Foreign investment and the export behaviour of foreign and local firms: an analysis of Turkish manufacturing," NBS Discussion Papers in Economics 2006/2, Economics, Nottingham Business School, Nottingham Trent University.
    15. Zadia M. Feliciano & Robert E. Lipsey, 1999. "Foreign Ownership and Wages in the United States, 1987 - 1992," NBER Working Papers 6923, National Bureau of Economic Research, Inc.
    16. Koop, Michael J., 1997. "Trade, Foreign direct investment, and multinational enterprises in a general equilibrium model," Kiel Working Papers 833, Kiel Institute for the World Economy.
    17. Davies, Ronald B., 2005. "Fragmentation of headquarter services and FDI," The North American Journal of Economics and Finance, Elsevier, vol. 16(1), pages 61-79, March.
    18. Ketteni, Elena & Kottaridi, Constantina, 2019. "The impact of regulations on the FDI-growth nexus within the institution-based view: A nonlinear specification with varying coefficients," International Business Review, Elsevier, vol. 28(3), pages 415-427.
    19. Mérette, Marcel & Georges, Patrick & Dissou, Yazid, 2008. "Liberalizing Foreign Direct Investment Restrictions in Canada: A Multi-Country Computable General Equilibrium Analysis," Conference papers 331743, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    20. Matthew J. Baltz, 2017. "Institutionalizing neoliberalism: CFIUS and the governance of inward foreign direct investment in the United States since 1975," Review of International Political Economy, Taylor & Francis Journals, vol. 24(5), pages 859-880, September.
    21. Joel S. Hellman & Geraint Jones & Daniel Kaufmann, 2003. "Far From Home: Do Foreign Investors Import Higher Standards of Governance in Transition Economies?," Development and Comp Systems 0308006, University Library of Munich, Germany.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    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:reviec:v:11:y:2003:i:5:p:845-859. See general information about how to correct material in RePEc.

    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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576 .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.