Trade,foreign direct investment or acquisition: Optimal entry modes for multinationals |
| |
| Affiliation: | 1. Department of Economics, Box 353330, University of Washington, Seattle, WA 98195, USA;2. University of Munich, Germany;3. Ifo Institute of Economic Research, Germany;4. National Economic Advisory Council, Korea;1. School of Economics, Fujian Agriculture and Forestry University, No. 15 Shangxiadian Road, Fuzhou, Fujian Province, 350002, PR China;2. China Academy for Rural Development (CARD), School of Public Affairs, Zhejiang University, 866 Yuhangtang Road, Hangzhou, Zhejiang Province, 310058, PR China;1. Bang College of Business, KIMEP University, 2 Abay Ave, Almaty 050010, Kazakhstan;2. EADA Business School, Carrer d’Arago, 204, 08011 Barcelona, Spain;3. PwC Chair of Accounting and Finance, Kazakh-British Technical University, 59 Tole bi, Almaty 050000, Kazakhstan |
| |
| Abstract: | We examine multinationals' optimal entry modes into foreign markets as a function of market size, FDI fixed costs, tariffs and transport costs. Our results highlight why large countries are more likely to attract acquisition investment, while intermediate sized countries may be served predominantly through trade, even in the presence of high tariffs. Small countries are most likely to experience either FDI or no entry. We also show how these results vary with the competition intensity in the host country.FDI fixed costs, tariffs and transport costs are crucial not only in determining whether to engage in FDI or trade, but they are also shown to influence the acquisition choice as trade and FDI threats influence the acquisition price. Finally, we explore the welfare implications of tariff reductions for both the local firm and the multinational and investigate political motives to impose endogenous tariffs that influence not only the welfare of a local firm, but also the entry mode of the multinational. |
| |
| Keywords: | |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
