Series: IMF Working Papers
Author(s): Alexander Lehmann
Publisher: INTERNATIONAL MONETARY FUND
Publication Date: 01 October 1999
Keywords: Foreign investment, investment under uncertainty, capital expenditures, foreign affiliates, foreign capital, capital formation, fdi
This paper develops a simple real options model that demonstrates the role of country-specific risk and sunk costs in determining a multinational’s choice between exports and foreign investment. The hypothes...