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Export‐supporting FDI

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  • Sebastian Krautheim

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. Investissement direct à l'étranger (IDE) pour supporter les exportations. Une grande fraction des succursales possédées par les compagnies manufacturières multinationales opèrent dans les secteurs commerciaux de gros et de détail. Ce texte propose un modèle de commerce international, d'investissement direct à l'étranger (IDE) horizontal, et d'investissement direct à l'étranger pour supporter les exportations (IDESE). Les IDESE réduisent les coûts de distribution à l'étranger, pendant que la production reste au pays. Les IDESE introduisent une complémentarité entre le commerce et les IDE, alors que commerce et production à l'étranger demeurent des substituts. Les données d'IDE au niveau de la firme des entreprises allemandes montrent que les IDESE sont quantitativement importants. Dans l'esprit du modèle, la plupart des firmes choisissent ou l'IDESE ou l'IDE horizontal dans un marché donné: l'IDESE est choisi par les sociétés‐mères plus petites, et est plus fort quand la distance de l'Allemagne est faible.

Suggested Citation

  • Sebastian Krautheim, 2013. "Export‐supporting FDI," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 46(4), pages 1571-1605, November.
    • Handle: RePEc:wly:canjec:v:46:y:2013:i:4:p:1571-1605
    DOI: 10.1111/caje.12061
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    References listed on IDEAS

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    3. Ren, Xiaoyan & Yang, Shuili, 2020. "Empirical study on location choice of Chinese OFDI," China Economic Review, Elsevier, vol. 61(C).
    4. Federico Carril-Caccia & Juliette Milgram Baleix, 2023. "Impact of Environmental Regulation on Cross-Border MAs in high- and low-polluting sectors," ThE Papers 23/04, Department of Economic Theory and Economic History of the University of Granada..
    5. Federico Carril-Caccia, 2020. "Will the Future EU-UK Free Trade Agreement Affect Foreign Direct Investment?," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 55(4), pages 266-270, July.

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