Export-Platform Foreign Direct Investment

43 Pages Posted: 8 Jun 2005

See all articles by Karolina Ekholm

Karolina Ekholm

Stockholm School of Economics - Department of Economics; Centre for Economic Policy Research (CEPR); Center for Business and Policy Studies (SNS); CESifo (Center for Economic Studies and Ifo Institute)

Rikard Forslid

Stockholm University; Centre for Economic Policy Research (CEPR)

James R. Markusen

University of Colorado at Boulder - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: January 2005

Abstract

An interesting empirical phenomenon is export-platform foreign-direct investment, particularly affiliate production for sale in third countries rather than in the parent or host countries. This is rather poorly understood because our theoretical understanding of multinationals is largely derived from two-country models. Our model shows how affiliate production solely for third countries can occur when a firm in each of two large, high-income countries has a domestic plant to serve its own market, and uses a plant in a small, low-cost country to serve the other highincome country. Third-country export-platform FDI can also occur when the host and third countries are inside a free-trade area and the parent is outside. Our empirical section shows that US affiliates located inside a free-trade area concentrate their exports to other free-trade member countries, consistent with parameterizations of our model in which the outside firm is the chief beneficiary of the free-trade area. Affiliates located outside of free-trade areas such as those in Southeast Asia show a balance between exports to the parent and exports to third countries, consistent with parameterizations that generate "global export-platform" production.

Keywords: Export, Foreign Direct Investment

Suggested Citation

Ekholm, Karolina and Forslid, Rikard and Markusen, James R., Export-Platform Foreign Direct Investment (January 2005). IIIS Discussion Paper No. 50. Available at SSRN: https://ssrn.com/abstract=739213 or http://dx.doi.org/10.2139/ssrn.739213

Karolina Ekholm (Contact Author)

Stockholm School of Economics - Department of Economics ( email )

P.O. Box 6501
Sveavagen 65
S-113 83 Stockholm
Sweden
+46 8 736 9220 (Phone)
+46 8 313 207 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Center for Business and Policy Studies (SNS)

Skoldungagatan 2, Box 5629
S-114 86 Stockholm
Sweden

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Rikard Forslid

Stockholm University ( email )

Universitetsvägen 10 A
House A, floor 4 and 7
Frescati, Stockholm
Sweden
+46 8 16 3096 (Phone)
+46 8 15 9482 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

James R. Markusen

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309
United States
303-492-0748 (Phone)
303-492-8960 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
195
Abstract Views
1,245
rank
118,107
PlumX Metrics