Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/37283 
Authors: 
Year of Publication: 
2010
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Trade and Foreign Dynamic Investment: Dynamics of Entry and Exit No. A5-V3
Publisher: 
Verein für Socialpolitik, Frankfurt a. M.
Abstract: 
The underlying model analyzes the first time foreign market entry decision of a representative investor who can choose between export and FDI. The model combines the proximity-concentration trade-off framework with the real option methodology and sheds light on the effects of productivity growth. On the basis of a Geometric Brownian motion, three different productivity scenarios are considered (no growth, deterministic growth, uncertain growth) and opposed to each other. The introduction of productivity growth increases the likeliness of first time market entry through FDI. If the firm is confronted with uncertain productivity growth, market entry through FDI increases even further. Uncertainty is identified as a compounding force for the derived growth effects. The findings contribute to the static general equilibrium models which neglect intertemporal selection effects.
Subjects: 
export
FDI
uncertain productivity growth
real option approach
JEL: 
F17
F21
F23
Document Type: 
Conference Paper

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