Does Experience Matter for Patterns of Expansion by U.S. Companies in Latin America and the Caribbean?
28 Pages Posted: 21 Dec 2014
Date Written: December 19, 2014
We describe expansion patterns by U.S. companies in Latin America and the Caribbean (LAC) between 1980 and 2005 using a unique sample that utilizes country, industry and time-series information on firms’ investments. We build on previous research to explore the effect of experience on firms’ preference for equity commitment. Using the time series properties of our data, we examine the extent to which previous investments in the region influence firms’ expansion patterns. Our analysis includes the traditional determinants of entry mode choices such as firm-specific factors, market seeking factors, resource seeking factors, and country specific factors. Bivariate probit results indicate that companies with previous experience in the region are more likely to commit equity going forward and this also holds for more recent companies with greater growth opportunities.
Keywords: Foreign Direct Investment, U.S. Companies, Latin America, Investment Strategies
JEL Classification: F23, N16, N26
Suggested Citation: Suggested Citation