CRPE双周青年学者论坛NO.264
1048
题 目：Quantifying Adaptation Costs in Sequential FDI Location Choices: Evidence from German Firms
报告人：朱爱勇 助理教授 武汉大学
主持人：罗德明 教授 浙江大学经济学院
时 间：
地 点：浙大玉泉校区经济学院418室
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Abstract：
When engaging in foreign direct investment (FDI) for the first time, multinational firms often incur large costs. They have to adapt to different business practices, ethical norms and regulations in a new country. Therefore, prior investment experience in a location can influence firms' FDI decisions in subsequent periods, since firms do not need to pay the adaptation costs if they invest in the same location again. In this context, I develop a dynamic structural model of how firms make sequential decisions of where to invest. Using data on German firms' FDI from 2002 to 2009, I estimate the model allowing for country-specific adaptation costs and firms' heterogeneous preference towards location attributes. Estimation results suggest that adaptation costs are statistically and economically significant, ranging from 0.9%-22.4% of the average expected discounted profit of a firm. If adaptation costs were subsidized completely, firms' FDI location choices would change dramatically. In addition, the average expected discounted profit would increase by 10.9%, not only due to the reduction of adaptation costs, but more importantly, due to a better matching between firms and locations.
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