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FDI as a signal of quality

Author

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  • Katayama, Seiichi
  • Miyagiwa, Kaz

Abstract

A new-product firm's entry strategy into foreign markets is considered. We show that, when product quality is unknown, a new-product firm may choose FDI over exporting to signal quality even if exporting is more cost-effective.

Suggested Citation

  • Katayama, Seiichi & Miyagiwa, Kaz, 2009. "FDI as a signal of quality," Economics Letters, Elsevier, vol. 103(3), pages 127-130, June.
  • Handle: RePEc:eee:ecolet:v:103:y:2009:i:3:p:127-130
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    References listed on IDEAS

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    1. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, pages 796-821.
    2. Bagwell, Kyle, 1991. "Optimal Export Policy for a New-Product Monopoly," American Economic Review, American Economic Association, pages 1156-1169.
    3. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, pages 300-316.
    4. Wolfgang Mayer, 1984. "The Infant-Export Industry Argument," Canadian Journal of Economics, Canadian Economics Association, vol. 17(2), pages 249-269, May.
    5. Bagwell, Kyle, 2007. "The Economic Analysis of Advertising," Handbook of Industrial Organization, Elsevier.
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    Cited by:

    1. Anthony Creane & Kaz Miyagiwa, 2010. "Exporting Versus Foreign Direct Investment: Learning through Propinquity," Emory Economics 1010, Department of Economics, Emory University (Atlanta).
    2. Koska, Onur A. & Long, Ngo Van & Staehler, Frank, 2015. "Foreign Direct Investment as a Signal," MPRA Paper 68025, University Library of Munich, Germany.

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