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Export-supporting FDI

Author

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  • Sebastian Krautheim

Abstract

A large fraction of affiliates owned by multinational manufacturing companies operate in the wholesale and retail sectors. This paper proposes a model of trade, horizontal FDI, and export-supporting FDI (ESFDI). ESFDI reduces distribution costs abroad, while production remains at home. ESFDI introduces a complementarity between trade and FDI, while trade and production abroad remain substitutes. German firmlevel FDI data show that ESFDI is quantitatively relevant. In line with the model, most firms choose either ESFDI or horizontal FDI in a given market; ESFDI is chosen by smaller parents and is strongest when distance from Germany is low.

Suggested Citation

  • Sebastian Krautheim, 2013. "Export-supporting FDI," Canadian Journal of Economics, Canadian Economics Association, vol. 46(4), pages 1571-1605, November.
  • Handle: RePEc:cje:issued:v:46:y:2013:i:4:p:1571-1605
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Engel, Dirk & Procher, Vivien, 2009. "Export, FDI and Productivity – Evidence for French Firms," Ruhr Economic Papers 111, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    2. Spies, Julia, 2010. "Network and border effects: Where do foreign multinationals locate in Germany?," Regional Science and Urban Economics, Elsevier, pages 20-32.
    3. Dirk Engel & Vivien Procher, 2013. "Home Firm Performance After Foreign Investments and Divestitures," The World Economy, Wiley Blackwell, vol. 36(12), pages 1478-1493, December.
    4. Zhan Qu & Horst Raff & Nicolas Schmitt, 2015. "Inventory Control and Intermediation in Global Supply Chains," CESifo Working Paper Series 5269, CESifo Group Munich.
    5. Gabriel Felbermayr & Benjamin Jung, 2011. "Trade Intermediation and the Organization of Exporters," Review of International Economics, Wiley Blackwell, pages 634-648.
    6. Bruce A. Blonigen & Donghyun Lee, 2016. "Heterogeneous Frictional Costs Across Industries in Cross-border Mergers and Acquisitions," NBER Working Papers 22546, National Bureau of Economic Research, Inc.
    7. repec:eee:reveco:v:51:y:2017:i:c:p:645-659 is not listed on IDEAS
    8. Jörn Kleinert & Farid Toubal, 2013. "Production versus distribution-oriented FDI," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), pages 423-442.
    9. Martin Coiteux & Patrick Rizzetto & Lena Suchanek & Jane Voll, 2014. "Why Do Canadian Firms Invest and Operate Abroad? Implications for Canadian Exports," Discussion Papers 14-7, Bank of Canada.
    10. Conconi, Paola & Sapir, André & Zanardi, Maurizio, 2016. "The internationalization process of firms: From exports to FDI," Journal of International Economics, Elsevier, vol. 99(C), pages 16-30.
    11. Luigi Bonatti & Andrea Fracasso, 2013. "The German Model and the European Crisis," Journal of Common Market Studies, Wiley Blackwell, vol. 51(6), pages 1023-1039, November.
    12. Luigi Bonatti & Andrea Fracasso, 2012. "A Germans� dilemma: save the euro or preserve their socio-economic model," Department of Economics Working Papers 1207, Department of Economics, University of Trento, Italia.
    13. Gabriel Felbermayr & Benjamin Jung, 2011. "Trade Intermediation and the Organization of Exporters," Review of International Economics, Wiley Blackwell, pages 634-648.
    14. V. Vicard, 2015. "Profit shifting through transfer pricing: evidence from French firm level trade data," Working papers 555, Banque de France.
    15. Schwab, Jakob & Ortseifer, Christina, 2015. "Reaping the Gains: Specialization and Capital Flows," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113194, Verein für Socialpolitik / German Economic Association.
    16. repec:bla:ecinqu:v:55:y:2017:i:2:p:778-793 is not listed on IDEAS

    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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