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Internalization and internationalization under copeting real options

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  • Fisch, Jan Hendrik

Abstract

The theories of internalization and internationalization provide general factors of international market entry but are not precise about its timing. A model of waiting and growth options seizes the importance of flexibility to FDI decisions and centers the impact of uncertainty. The results of a panel study using aggregates of 5379 German entries to 22 countries suggest that uncertainty has a U-shaped influence on the probability of entry and a negative effect on the amount of capital whereas it leaves the share in capital unaffected. Investors seem to treat foreign subsidiaries as real options on internationalization but not on internalization.

Suggested Citation

  • Fisch, Jan Hendrik, 2006. "Internalization and internationalization under copeting real options," Discussion Paper Series 1: Economic Studies 2006,15, Deutsche Bundesbank.
  • Handle: RePEc:zbw:bubdp1:4354
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    References listed on IDEAS

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    More about this item

    Keywords

    Foreign Direct Investment; Market Entry Mode; Real Options; Uncertainty; Timing;

    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
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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