Export versus FDI: Learning through propinquity

Anthony Creane, Kaz Miyagiwa

Research output: Contribution to journalArticlepeer-review

2 Scopus citations


This paper considers the strategic role learning plays on the choice between FDI and export under demand and cost uncertainty. FDI allows a foreign firm to learn local demand, which is beneficial. However, as it buys inputs from the same local input markets as the rival home firm, two firms’ costs become perfectly correlated, which we prove harmful to the foreign firm. Thus, the interplay of the demand acquisition and the cost correlation effect affects FDI decisions. We show that FDI is more likely to occur when firms produce more differentiated goods and that FDI almost always reduces host country welfare.

Original languageEnglish
JournalInternational Journal of Economic Theory
StateAccepted/In press - 2018


  • FDI versus export
  • demand and cost uncertainty
  • information acquisition
  • welfare effect of FDI

ASJC Scopus subject areas

  • Economics and Econometrics


Dive into the research topics of 'Export versus FDI: Learning through propinquity'. Together they form a unique fingerprint.

Cite this