Strategic Investments and the Development of Multinationals

Horstmann, Ignatius J.; Markusen, James R.

doi:10.2307/2526862

Cited by 248 publications

(118 citation statements)

References 6 publications

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“…We show that depending on the level of the tariffs, the value of the set up cost and the size of the market, there are five possible equilibrium outcomes: exports accommodation, FDI accommodation, FDI deterre n c e , exports deterrence and blockaded entry. The conventional wisdom, which is consistent with the prediction of Horstman and Markusen [1987] and [1992], is that low tariffs encourage exports and higher tariffs lead to FDI. Our main result indicates that low tariffs may be conducive to more extensive foreign investment which is contrary to the conventional wisdom.…”

Section: Introductionsupporting

confidence: 73%

“…Some recent and closely related papers Horstman and Markusen [1987], Smith [1987], Motta [1992] and Markusen [1997] examined the conditions which lead to the existence of a multinational enterprise (MNE). The similarity between their investigation and our lies in the strategic aspects of the analysis.…”

Section: Introductionmentioning

confidence: 99%

“…The strategy chosen by the domestic firms with regard to entry of the foreign firm will ultimately determine how the foreign firm will service the domestic market. 3 Although our paper focuses on a situation which is somewhat different from the one examined by Horstman and Markusen [1987], Smith [1987] and Motta [1992], a comparison is instructive. In these papers the common assumption is that the 3.…”

Section: Introductionmentioning

confidence: 99%

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Exporting versus Foreign Direct Investment

Donnenfeld¹,

Weber²

2000

JEI

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In this paper we investigate how strategic aspects influence the choice between e x p o r ting and servicing foreign markets by setting up a plant in the foreign country. We show that tariffs on imports in conjunction with the size of the set up costs i n c u r red while setting up plants and the size of the foreign market will determ i n e whether domestic firms which face competition from a foreign firm will choose to deter foreign direct investment (FDI), prevent exports or may accommodate either f o r m of penetration of a foreign firm in their market. Our analysis reveals that there is no simple relationship between the size of the tariff and the propensity of fore i g n f i r ms to engage in foreign direct investment. Higher tariffs may result in export s rather than FDI. Furt h e rm o r e, due to actual competition among domestic firm s while facing potential competition in the form of FDI, a rise in tariffs may

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Section: Introductionsupporting

confidence: 73%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Exporting versus Foreign Direct Investment

Donnenfeld¹,

Weber²

2000

JEI

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“…It is easy to see that the relationship between FDI and geographical distance is type dependent. The extent of horizontal FDI increases with geographical distance because distance increases the transactions cost of trade (Brainard, 1993;Horstman and Markusen, 1987;Markusen and Venables, 1998). By contrast, vertical FDI and distance have an inverse relationship on account of the adverse impact of transport cost on input cost (Helpman, 1984).…”

Section: Model Specificationmentioning

confidence: 99%

China's economic cooperation related investment: An investigation of its direction and some implications for outward investment

Bhaumik

2011

China Economic Review

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“…In addition to papers already mentioned, related models of FDI include Markusen (1984), Helpman (1985), and Horstmann and Markusen (1987). Nearly all such models consider only two countries.…”

mentioning

confidence: 99%