Production versus distribution-oriented FDI

The business literature has long recognized the importance of multinationals' distribution networks. The empirical analysis of distribution-oriented FDI has, however, received little attention which is at least partly due to the lack of appropriate data. We present a slightly modified version o...

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Bibliographic Details
Published in:Review of world economics 2013-09, Vol.149 (3), p.423-442
Main Authors: Kleinert, Jörn, Toubal, Farid
Format: Article
Language:English
Subjects:
Business
Business structures
Capital costs
Cost
Distribution
Econometrics
Economic Policy
Economic theory
Economics
Economics and Finance
Economics, International
Empirical research
European Integration
Exports
Fixed costs
Foreign direct investment
Foreign investment
Foreign investments
Global economy
Humanities and Social Sciences
International Economics
International trade
Macroeconomics/Monetary Economics//Financial Economics
Manufacturing industries
Market size
Multinational corporations
Multinational enterprises
Original Paper
Production
Production costs
Productivity
Regression analysis
Sales
Trade
Trade-off
Wholesale trade
Wholesaling
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Summary:The business literature has long recognized the importance of multinationals' distribution networks. The empirical analysis of distribution-oriented FDI has, however, received little attention which is at least partly due to the lack of appropriate data. We present a slightly modified version of Helpman et al. (Am Econ Rev 94(1): 300-316, 2004) that explicitly models the possibility for a multinational firm to export through its wholesale trade affiliate. We analyze the multinational firms' choice between foreign production and foreign distribution. Our empirical analysis uses different discrete choice models and alternative specifications for several sub-samples of multinational firms. Our results show that the choice between distribution and production-oriented FDI is based on the trade-off between fixed and variable costs.
ISSN:1610-2878
1610-2886
DOI:10.1007/s10290-013-0158-1