| dc.description.abstract | This dissertation considers a vertical market model, concluding a domestic intermediate good firm, foreign final good firm and the final good market locates at the third country. The upstream firm in home country can choose export or foreign direct investment (FDI) to supply intermediate goods. Our main concern is to distinguish the exchange rates among the three countries how to influent the export / FDI strategy of the domestic firm.
We first consider that the FDI set-up fixed cost completely emerges in the foreign country. Under this situation, when the third country currency depreciates, the intermediate good firm in home country may choose to exit instead of export or FDI; it also let the intermediate good firm may choose export rather than FDI. When facing home currency depreciates, it let the intermediate good firm in home country may choose export instead of FDI; but the firm taking quitting strategy, it may choose export to supply intermediate good, if the firm never enter market. When foreign currency depreciates, causing home and the third currency fluctuate at the same level, it may let intermediate good firm in home country choose exit or export rather FDI; if home currency depreciates higher than the third, intermediate good firm in home country will exit instead of FDI or export; it might also let intermediate good firm in home country choose export rather than FDI; contrarily, if home currency depreciates smaller than the third, intermediate good firm in home country will choose exit or export rather than FDI, and intermediate good firm in home country will take export strategy if they never enter market.
Finally, this dissertation also generalizes the set-up fixed cost. That is the fixed cost containing some proportion coming from home country. At the meantime, the main results don’t change, but when home currency depreciates, except for letting home country choose export instead of FDI, or choose export if they don’t enter market, it might let home country choose FDI rather than export, but if they never enter market, they will choose FDI. When home currency depreciates larger than the third, if their difference is not large, the domestic intermediate good firm will choose export or exit rather than FDI; if they don’t enter market, they’ll choose export; contrarily, if their differences are large enough, it let domestic intermediate good firm may choose export instead of FDI, and intermediate good firm in home country may choose FDI rather than export; intermediate good firm in home country may choose FDI or export if they never enter market at first.
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