Playing away to win at home |
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Authors: | Dermot Leahy Stephen Pavelin |
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Affiliation: | aUniversity College Dublin, Dublin,Ireland;bEconomics Department, The Business School, University of Reading, Reading RG6 6AA, UK |
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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 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. |
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Keywords: | Foreign direct investment Multinational firm R& D Oligopoly |
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