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| Author: | Fraja, G. de Norman, G. |
| Title: | Product differentiation an the location of international production |
| Journal: | Journal of Economics & Management Strategy
2004 : SPRING, VOL. 13:1, p. 151-170 |
| Index terms: | Strategic management Product differentiation Foreign investment Location of industry Models |
| Language: | eng |
| Abstract: | This study analyzes how product differentiation influences firms' choice between exporting and foreign direct investment. When product specifications are determined endogenously, it is shown that there is no symmetric solution to the product specification subgame. The cost disadvantage of an exporting firm translates into a disadvantage in product specification. Overseas production is favoured if this allows the investing firm to adopt a more aggressive product specification. The analysis suggests an ambiguous relationship among location, product differentiation, and cost and demand functions, confirmed by the existence of a parameter range for which there is no pure strategy equilibrium in location choice. |
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