Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/71843
Authors: 
Oberhofer, Harald
Pfaffermayr, Michael
Year of Publication: 
2011
Series/Report no.: 
Working Papers in Economics and Finance, University of Salzburg 2011-03
Abstract: 
There are two main options for companies to serve foreign markets: exports and foreign direct investment (FDI). Based on the Helpman, Melitz and Yeaple (2004) model for multiple host countries this paper derives a clear theoretical prediction for the decision between both strategies. A bivariate probit model is estimated using a large data set of European companies to analyze the probability of using one or the other strategy. The empirical evidence indicates that more productive firms less (more) probably use the export (FDI) strategy to serve foreign markets. Moreover, a considerable number of companies use a combination of both strategies to serve foreign markets, which is in line with a multiple country model.
Subjects: 
Heterogeneous Firms
Exports
Foreign Direct Investment
Multiple Host Countries
Bivariate Probit Estimation
JEL: 
C35
D22
F12
Document Type: 
Working Paper

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