A signalling model of firms' foreign direct investment relocation decision

• Type: Article in International Scientific Journal
• Date: 2008

Authors

Forte, R (Author) FEP; Brandao, A (Author) FEP

Journal

Title: International Journal of the Economics of Business

Vol. 15 No. 3

Pages: 339-357

ISSN: 1357-1516

Publisher: Taylor & Francis

Indexing

ISI Web of Knowledge

Scopus - 0 Citations

Other information

Authenticus ID: P-007-P1Y

DOI: 10.1080/13571510802465112

Abstract (EN): We analyse whether the foreign government can influence the multinational firm's relocation decision, through signalling the amount of subsidy it can grant. The foreign country is one of two possible types which differ on their investment conditions. Comparing the results obtained with an adverse selection model (the government knows the country type but the firm does not) with the results of a signalling model, we conclude that relocation is more likely, and the necessary subsidy is smaller, in the signalling model than with adverse selection. This can explain the proliferation of Investment Support Agencies worldwide.

Language: English

Type (Professor's evaluation): Scientific