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To lead or to wait? An application to internationalization strategies under demand uncertainty

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  • Maja Barac
  • Rafael Moner‐Colonques

Abstract

We examine the exports versus foreign direct investment (FDI) decision under demand uncertainty for an asymmetric cost duopoly. One of the firms can lead entry before demand realization or retain flexibility enjoying an informational advantage. When the time value of information is small and for sufficiently low investment costs, follow‐the‐leader behavior in FDI arises. Relatively high investment (fixed) costs result in follow‐the‐leader exporting behavior. When the time value of information becomes significant, the potential leader will opt for a wait‐and‐see strategy. For intermediate values of investment costs, the efficient firm invests, while the rival chooses to export.

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  • Maja Barac & Rafael Moner‐Colonques, 2019. "To lead or to wait? An application to internationalization strategies under demand uncertainty," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 40(5), pages 559-568, July.
    • Handle: RePEc:wly:mgtdec:v:40:y:2019:i:5:p:559-568
    DOI: 10.1002/mde.3026
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    1. Maja Barac & Rafael Moner‐Colonques, 2022. "Leadership in internationalization strategies," Manchester School, University of Manchester, vol. 90(3), pages 293-318, June.

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