Option Value, Policy Uncertainty, and the Foreign Direct Investment Decision

Yu-Fu Chen and Michael Funke

No 26373, Discussion Paper Series from Hamburg Institute of International Economics

Abstract: In this paper we analyse the impact of policy uncertainty on foreign direct investment strategies. The paper follows the real options approach, which allows to investigate the value to a firm of waiting to invest and/or disinvest, when payoffs are stochastic due to political uncertainty and investments are partially reversible. Across the board we find that political uncertainty can be very detrimental to FDI decisions.

Keywords: International; Relations/Trade (search for similar items in EconPapers)
Pages: 23
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
https://ageconsearch.umn.edu/record/26373/files/dp030234.pdf (application/pdf)

Related works:
Working Paper: Option value, policy uncertainty, and the foreign direct investment decision (2004)
Working Paper: Option Value, Policy Uncertainty and The Foreign Direct Investment Decision (2003)
Working Paper: Option Value, Policy Uncertainty, and the Foreign Direct Investment Decision (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:hwwadp:26373

DOI: 10.22004/ag.econ.26373

Access Statistics for this paper

More papers in Discussion Paper Series from Hamburg Institute of International Economics Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().