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Title:
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| Number: | 07-06 |
| Author: | |
| Issue Date: | March 2007 |
| Abstract: | This paper considers a new-product firm’s choice between
exporting and foreign direct investment (FDI) to access foreign
markets. We find that, when quality is unknown to buyers, the firm may
choose FDI over exporting to signal quality, even though FDI is a
costlier mode of access than exporting. We then use the model to study
the effect of local labor requirement policy imposed by the host
country government. |
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