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A Theoretical Perspective on the Location of Banking FDI

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  • Mohamed Azzim Gulamhussen

    (ISCTE Business School)

Abstract

The paper models location of banking FDI under volatile demand conditions. In the model, information arrives either through passage of time or though presence in the foreign market. The model is also extended to analyze strategic and simultaneous FDI. The results show that market entry evolves from deferring FDI to partial FDI and only then to full FDI. The switch to partial FDI occurs faster when banks can gather information only through a presence in the foreign market. The switch to partial FDI does not occur when immediate full FDI enables more efficient production. The results are at odds with models developed for predictable demand conditions in which banks switch straight from deferring FDI to full FDI. The paper generates an integrated view of the location of banking FDI.

Suggested Citation

  • Mohamed Azzim Gulamhussen, 2009. "A Theoretical Perspective on the Location of Banking FDI," Management International Review, Springer, vol. 49(2), pages 163-178, April.
    • Handle: RePEc:spr:manint:v:49:y:2009:i:2:d:10.1007_s11575-008-0134-5
    DOI: 10.1007/s11575-008-0134-5
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