A Theoretical Perspective on the Location of Banking FDI
Gulamhussen, Mohamed Azzim
Gulamhussen, Mohamed Azzim
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Publication Type
Journal article
Editor
Supervisor
Publication Year
2009-04
Journal
Management International Review
Book
Publication Volume
49
Publication Issue
2
Publication Begin page
163
Publication End page
178
Publication Number of pages
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Abstract
The paper models location of banking FDI under volatile demand conditions. In the model, information arrives either through passage of time or though presence in the foreign market. The model is also extended to analyze strategic and simultaneous FDI.The results show that market entry evolves from deferring FDI to partial FDI and only then to full FDI. The switch to partial FDI occurs faster when banks can gather information only through a presence in the foreign market. The switch to partial FDI does not occur when immediate full FDI enables more efficient production. The results are at odds with models developed for predictable demand conditions in which banks switch straight from deferring FDI to full FDI. The paper generates an integrated view of the location of banking FDI.
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Keywords
3502 Banking, Finance and Investment, 35 Commerce, Management, Tourism and Services