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Playing away to win at home

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Abstract

This paper presents a model of the interaction between two rival firms based in the same country. Each firm must decide how to serve a foreign market (export or foreign production) and how much to invest in a corporate-wide asset that reduces production costs and/or augments the willingness-to-pay for their product. In this scenario, the firms’ foreign direct investment decisions are interdependent. Furthermore, strategic motives for FDI relate not to a firm’s domestic, as well as foreign, market profits. One possibility is that a firm sets up overseas production even though its foreign market profits would be higher by exporting.

Suggested Citation

  • Stephen Pavelin, 2006. "Playing away to win at home," Working Papers 200626, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:200626
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    File URL: http://hdl.handle.net/10197/1271
    File Function: First version, 2006
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    Cited by:

    1. is not listed on IDEAS
    2. Stephen Pavelin & Lynda A. Porter, 2011. "Race-to-the-Bottom or -Top at Home or Abroad: Health and Safety Standards and the Multinational Firm," The Economic and Social Review, Economic and Social Studies, vol. 42(3), pages 289-311.
    3. Dong, Quan & Bárcena-Ruiz, Juan Carlos, 2015. "Does investment in capacity encourage FDI?," Economic Modelling, Elsevier, vol. 51(C), pages 58-64.
    4. Juan Bárcena-Ruiz & María Garzón, 2014. "Relocation and investment in R&D by firms," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 13(1), pages 25-38, April.

    More about this item

    Keywords

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    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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