Transaction costs and foreign direct investment in developing countries |
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Authors: | Tejinder S Sara Benjamin Newhouse |
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Institution: | (1) Tuskegee University, USA |
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Abstract: | Foreign Direct Investment (FDI) has been used by a number of developing countries to build a national competitive advantage
in a global economy. Most of the literature on FDI in developing countries has focused on low-cost factors in these countries.
But in a global economy where low cost factors are available at various locations around the globe, transaction costs related
to the assumptions of "bounded rationality" and "opportunism" are becoming increasingly important in FDI decisions. These
assumptions have been applied by researchers over the years to explain major changes in the organizational structure of corporations.
This paper incorporates the assumptions of bounded rationality and opportunism to discuss factors that a firm considers in
its decision to undertake FDI. A statistical analysis was carried out to test the validity of the arguments presented in the
paper. |
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Keywords: | |
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