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Exploring New Markets: Direct Investment, Contractual Relations and the Multinational Enterprise / Ignatius J. Horstmann, James R. Markusen.
- Format:
- Book
- Author/Creator:
- Horstmann, Ignatius J.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w5029.
- NBER working paper series no. w5029
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Exploring New Markets
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1995.
- Summary:
- We consider the multinational firm's decision on whether to enter a new market immediately via direct investment or to contract initially with a local agent and (possibly) invest later. Use of a local agent allows the multinational to avoid costly mistakes by finding out if the market is large enough to support direct investment. However, the agent is able to extract information rents from the multinational due to being better informed about market characteristics. We find that direct investment is the desirable mode of entry when the market is on average large and there is little down- side risk in expected profits.
- Notes:
- Print version record
- February 1995.
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