Option Value, Policy Uncertainty, and the Foreign Direct Investment Decision

In this paper we analyse the impact of policy uncertainty on foreign direct investment strategies. The paper follows the real options approach, which allows to investigate the value to a firm of waiting to invest and/or disinvest, when payoffs are stochastic due to political uncertainty and investments are partially reversible. Across the board we find that political uncertainty can be very detrimental to FDI decisions.

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Year of publication:	2003
Authors:	Chen, Yu-Fu ; Funke, Michael
Publisher:	Hamburg : Hamburg Institute of International Economics (HWWA)
Subject:	Direktinvestition \| Betriebliche Investitionspolitik \| Realoption \| Politische Stabilität \| Theorie \| Real options \| Investment \| Foreign Direct Investment \| Political Uncertainty

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Series:	HWWA Discussion Paper ; 234
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	367168103 [GVK] hdl:10419/19206 [Handle] RePEc:zbw:hwwadp:26373 [RePEc]
Classification:	F21 - International Investment; Long-Term Capital Movements ; E22 - Capital; Investment (including Inventories); Capacity ; D81 - Criteria for Decision-Making under Risk and Uncertainty ; D92 - Intertemporal Firm Choice and Growth, Investment, or Financing
Source:	EconStor

Persistent link: https://www.econbiz.de/10010295367