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Location factors of export-platform foreign direct investment: Evidence from Vietnam

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Abstract

The purpose of this paper is to examine the export-platform foreign direct investment as a strategic behavior of multinational firms. First, we use a three-country model to identify the main location factors of this investment. These factors are relative labor cost between the host country and the home country and/or the third country, technological transfer cost of host country, intra-regional transport cost and the market size of third country. Particularly, this kind of investment is preferred rather than other entry modes, if and only if, the third market size is high enough. Second, the model is tested for export oriented industries in Vietnam. The integration of the Vietnamese economy into regional or international markets has a positive impact on the choice of export-platform foreign direct investment strategy. In particular, in this country, the first motivation is to access to large markets (ASEAN, U.S., European Union). Other motivations concern low cost of technological transfer and real exchange rate.

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  • Huu Thanh Tam Nguyen & Med Kechidi & Alexandre Minda, 2013. "Location factors of export-platform foreign direct investment: Evidence from Vietnam," Documents de recherche 13-04, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
  • Handle: RePEc:eve:wpaper:13-04
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    Keywords

    Export-platform foreign direct investment; location factors; three-country model; multinational firm; Vietnam;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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