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| Author: | Aizenman, J. Marion, N. |
| Title: | The merits of horizontal versus vertical FDI in the presence of uncertainty |
| Journal: | Journal of International Economics
2004 : JAN, VOL. 62:1, p. 125-148 |
| Index terms: | Foreign investment Supply and demand Uncertainty |
| Language: | eng |
| Abstract: | The impact of uncertainty is examined on vertical and horizontal FDI. The model shows that greater supply uncertainty reduces the expected income from vertical FDI but increases the expected income from horizontal FDI. Greater demand uncertainty adversely affects the expected income under both production modes. Uncertainty about predatory actions by the host country is more costly to the multinational under vertical than under the horizontal mode. Sales by foreign affilates of U.S. parent companies are examined. |
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