2008-09-01
Learning from foreign investment by rival firms: Theory and evidence
Publication
Publication
International Journal of Industrial Organization , Volume 26 - Issue 5 p. 1203- 1217
We offer an alternative explanation for follow-the-leader behavior in foreign investment decisions based on Bayesian learning by rival firms. We test the implications of the model through a panel count data sample of MNEs that have invested in Central and Eastern Europe over the period 1990–1997. Interacting the measure of rivals' investment in country-industry pairs with uncertainty, we are able to identify the channel of Bayesian learning about revenue postulated by the model as the only one consistently generating the detected follow-the-leader behavior of foreign investments. The empirical findings are robust with respect to different model specifications.
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doi.org/10.1016/j.ijindorg.2007.12.002, hdl.handle.net/1765/13557 | |
ERIM Top-Core Articles | |
International Journal of Industrial Organization | |
Organisation | Erasmus Research Institute of Management |
Altomonte, C., & Pennings, E. (2008). Learning from foreign investment by rival firms: Theory and evidence. International Journal of Industrial Organization, 26(5), 1203–1217. doi:10.1016/j.ijindorg.2007.12.002 |