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The Choice and Timing of Foreign Market Entry under Uncertainty

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  • Sleuwaegen, Leo
  • Pennings, Enrico

Abstract

This paper sheds new light on why timing and entry mode should be considered simultaneously. We derive the profit levels at which it is optimal to switch from exporting to setting up a wholly owned subsidiary, creating a joint venture, or licensing production to a local firm. The preferred entry mode depends on uncertainty about future profits, tax differentials between the home and the foreign country, the cost advantages of local firms, institutional requirements, and the degree of cooperation between partners in a joint venture.

Suggested Citation

  • Sleuwaegen, Leo & Pennings, Enrico, 2000. "The Choice and Timing of Foreign Market Entry under Uncertainty," CEPR Discussion Papers 2470, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:2470
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    References listed on IDEAS

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    Cited by:

    1. Elmar Lukas, 2005. "Sequential International Joint-Ventures and the Option to Choose," International Finance 0504007, University Library of Munich, Germany, revised 15 Nov 2005.
    2. Gilroy, Bernard Michael & Lukas, Elmar, 2006. "The choice between greenfield investment and cross-border acquisition: A real option approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(3), pages 447-465, July.
    3. Bürgel, Oliver & Fier, Andreas & Licht, Georg & Murray, Gordon, 2001. "Timing of international market entry of UK and German high-tech start-ups," ZEW Discussion Papers 01-51, ZEW - Leibniz Centre for European Economic Research.
    4. Bart Hertveldt & Chantal Kegels & Bernhard Klaus Michel & Bart Van den Cruyce & Joost Verlinden & Frédéric Verschueren, 2005. "Working Paper 16-05 - Déterminants de la localisation internationale, avec application aux secteurs Agoria [Working Paper 16-05 - Determinanten van internationale lokalisatie, met toepassing op de ," Working Papers 0516, Federal Planning Bureau, Belgium.

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    More about this item

    Keywords

    Irreversible investment; Joint ventures; Nash bargaining; Tax policy; Uncertainty;
    All these keywords.

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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