FDI as a Signal of Quality
This paper considers a new-product firm's choice between exporting and foreign direct investment (FDI) to access foreign markets. We find that, when quality is unknown to buyers, the firm may choose FDI over exporting to signal quality, even though FDI is a costlier mode of access than exporting. We then use the model to study the effect of local labor requirement policy imposed by the host country government.
|Date of creation:||Mar 2007|
|Date of revision:|
|Contact details of provider:|| Web page: http://economics.emory.edu/home/journals/|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004.
"Export Versus FDI with Heterogeneous Firms,"
American Economic Review,
American Economic Association, vol. 94(1), pages 300-316, March.
- Kyle Bagwell, 1990.
"Optimal Export Policy for a New-Product Monopoly,"
898, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Paul R. Milgrom & John Roberts, 1984.
"Price and Advertising Signals of Product Quality,"
Cowles Foundation Discussion Papers
709, Cowles Foundation for Research in Economics, Yale University.
- Wolfgang Mayer, 1984. "The Infant-Export Industry Argument," Canadian Journal of Economics, Canadian Economics Association, vol. 17(2), pages 249-69, May.
- Bagwell, Kyle, 2007. "The Economic Analysis of Advertising," Handbook of Industrial Organization, Elsevier.
When requesting a correction, please mention this item's handle: RePEc:emo:wp2003:0706. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sue Mialon)
If references are entirely missing, you can add them using this form.