Cost harmonization is said to occur when foreign firms' marginal costs are brought closer or equalized to domestic firms' costs. It can occur for various reasons, ranging from foreign direct investment to falling transport cost and policy changes in the foreign country. In this paper we derive...

We examine a firm's choice between exporting and foreign direct investment (FDI) under demand and cost uncertainty. FDI enables the foreign firm to meet shifting local demand more quickly, increasing profit. However, FDI means using local inputs, so when the foreign firm competes with the local...

Foreign direct investment (FDI) gives foreign firms access to local labor and inputs, thereby harmonizing costs between foreign and domestic firms relative to exports. This paper investigates the welfare effects of such cost harmonization in strategic environments, finding that when the number...

We examine the role of cost uncertainty in a firm's choice between exporting and foreign investment in oligopolistic industry. We consider both foreign direct investment and an international joint venture, and allow country-specific and firm-specific cost uncertainty. Unlike exporting, either...

We examine the standard assumption in the strategic trade policy literature that governments possess complete information. Assuming instead that firms have better information, we explore the long-term incentives for firms to consistently disclose information to their governments in the standard...

We examine a foreign firm's choice between exporting and foreign direct investment (FDI) under country-specific cost uncertainty. Unlike exporting, FDI exposes foreign and home firms to common shocks. This results in a correlation of strategies, harming the firms. However, the exposure to common...