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FDI versus Exports. Substitutes or Complements? A Three Nation Model and Empirical Evidence

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  • Harald Oberhofer
  • Michael Pfaffermayr

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 two host countries this paper derives a clear theoretical prediction for the decision between both strategies. A bivariate probit model is estimated using AMADEUS database to analyse the probability of using one or the other strategy. The empirical evidence indicates that a considerable number of companies use a combination of both strategies to serve foreign markets, which is in line with the analyzed three country model.

Suggested Citation

  • Harald Oberhofer & Michael Pfaffermayr, "undated". "FDI versus Exports. Substitutes or Complements? A Three Nation Model and Empirical Evidence," Working Papers 2007-28, Faculty of Economics and Statistics, Universität Innsbruck.
    • Handle: RePEc:inn:wpaper:2007-28
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    References listed on IDEAS

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    3. Andrea M. Leiter & Harald Oberhofer & Paul A. Raschky, "undated". "Productive disasters? Evidence from European firm level data," Working Papers 2007-25, Faculty of Economics and Statistics, Universität Innsbruck.
    4. James B. Davies & Martin G. Kocher & Matthias Sutter, 2008. "Economics research in Canada: a long‐run assessment of journal publications," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 41(1), pages 22-45, February.
    5. Jesús Crespo-Cuaresma & Neil Foster & Johann Scharler, 2007. "Barriers to Technology Adoption, International R&D Spillovers and Growth," Working Papers 2007-09, Faculty of Economics and Statistics, Universität Innsbruck.
    6. Anita Gantner, 2007. "Bargaining, Search, and Outside Options," Working Papers 2007-16, Faculty of Economics and Statistics, Universität Innsbruck.
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    Citations

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    Cited by:

    1. Martin Falk & Mariya Hake, 2008. "A Panel Data Analysis on FDI and Exports," WIFO Studies, WIFO, number 34229, March.
    2. Ferragina Anna Maria & Colacurcio Claudio, 2015. "Italian FDI and Exports at Sectoral Level: Substitutes or Complements?," Global Economy Journal, De Gruyter, vol. 15(2), pages 277-310, July.
    3. Florentina Viorica GHEORGHE & Artur - Emilian SIMION, 2018. "The link between international trade flows of "Machinery and transport equipment" and foreign direct investment in Romania," Computational Methods in Social Sciences (CMSS), "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences, vol. 6(1), pages 42-54, June.
    4. Buch, Claudia M. & Kesternich, Iris & Lipponer, Alexander & Schnitzer, Monika, 2010. "Exports Versus FDI Revisited: Does Finance Matter?," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 340, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    5. repec:wsr:ecbook:2008:i:i-012 is not listed on IDEAS
    6. Thi Hong Hanh Pham, 2012. "Temporal causality and the dynamics of foreign direct investment and trade in Vietnam," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(1), pages 83-113, September.

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    More about this item

    Keywords

    Exports; Foreing Direct Investment; Three Nation Model; Bivariate Probit Estimation;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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