Export‐supporting FDI

Sebastian Krautheim

52 citations0/0 files storedCanadian Journal of Economics/Revue canadienne d économique

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International Business and FDI Global trade and economics Economic Zones and Regional Development

Abstract

Abstract A large fraction of affiliates owned by multinational manufacturing companies operate in the wholesale and retail sectors. This paper proposes a model of trade, horizontal FDI, and export‐supporting FDI (ESFDI). ESFDI reduces distribution costs abroad, while production remains at home. ESFDI introduces a complementarity between trade and FDI, while trade and production abroad remain substitutes. German firm‐level FDI data show that ESFDI is quantitatively relevant. In line with the model, most firms choose either ESFDI or horizontal FDI in a given market; ESFDI is chosen by smaller parents and is strongest when distance from Germany is low.

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References

2004Export Versus FDI with Heterogeneous Firms 2008Estimating Trade Flows: Trading Partners and Trading Volumes *2008Distorted Gravity: The Intensive and Extensive Margins of International Trade n.d.The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs.1993An Empirical Assessment of the Proximity-Concentration Tradeoff between Multinational Sales and Trade 2004Why Some Firms Export 2012Notes on CEPII’s Distances Measures: The GeoDist Database 2007Transportation Costs and International Trade in the Second Era of Globalization

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