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A note on firm-productivity and foreign direct investment

Author

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  • Arijit Mukherjee

    (University of Nottingham)

Abstract

Assuming linear demand and unit transportation cost, Head and Ries (2003, 'Heterogeneity and the FDI versus export decision of Japanese manufacturers', Journal of the Japanese and International Economies) conclude that the theoretical prediction of Helpman et al. (2004, 'Export versus FDI with heterogeneous firms', The American Economic Review), which show that the more productive firms undertake FDI and the less productive firms export, does not depend on their assumptions of CES preferences and iceberg transportation costs. Considering iceberg transportation costs in an otherwise similar setup of Head and Ries (2003), we show that the theoretical prediction of Helpman et al. (2004) may not hold. Hence, CES preference in Helpman et al. (2004) is important for their theoretical results.

Suggested Citation

  • Arijit Mukherjee, 2010. "A note on firm-productivity and foreign direct investment," Economics Bulletin, AccessEcon, vol. 30(3), pages 2107-2111.
    • Handle: RePEc:ebl:ecbull:eb-10-00324
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    Cited by:

    1. Timo Mitze & Fabian Kreutzer, 2023. "Relocation, innovation, and the difference that firm size makes: Insights for global sourcing strategies of SMEs," Journal of International Entrepreneurship, Springer, vol. 21(3), pages 354-384, September.
    2. Sugata Marjit & Toru Kikuchi, 2011. "Time Zones and FDI with Heterogenous Firms," Discussion Papers Series 425, School of Economics, University of Queensland, Australia.

    More about this item

    Keywords

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    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business

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