Political Risk, Economic Integration, and the Foreign Direct Investment Decision
In this paper we analyse the impact of policy uncertainty on foreign direct investment strategies. We also consider the impact of economic integration upon FDI decisions. The paper follows the real options approach, which allows investigating the value to a firm of waiting to invest and/or disinvest, when payoffs are stochastic due to political uncertainty and investments are partially reversible. Across the board we find that political uncertainty can be very detrimental to FDI decisions while economic integration leads to an increasing benefit of investing abroad.
|Date of creation:||2008|
|Date of revision:|
|Contact details of provider:|| Postal: 31 Buccleuch Place, EH8 9JT, Edinburgh|
Web page: http://www.sire.ac.uk
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"Economic instability and aggregate investment,"
3552-93., Massachusetts Institute of Technology (MIT), Sloan School of Management.
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Palgrave Macmillan, vol. 48(4), pages 6.
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- Gregory J. Brock, 1998. "Foreign direct investment in Russia's regions 1993-95. Why so little and where has it gone?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 6(2), pages 349-360, November.
- Ephraim Clark, 2003. "Pricing the Cost of Expropriation Risk," Review of International Economics, Wiley Blackwell, vol. 11(2), pages 412-422, 05.
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