Who Goes Where and How? Firm and Country Characteristics in the Choice of FDI Type and Location

This paper examines the roles of firm and country characteristics in determining multinationals' choice of foreign direct investment (FDI) type and location. Using Korean firm‐level data, we find that highly productive firms are more likely than their less efficient counterparts to invest in tough markets and choose a combined FDI strategy rather than a solely horizontal FDI or vertical FDI strategy across host countries. These findings, consistent with recent theories in international economics, indicate that firm and country heterogeneities play a significant role in determining the FDI strategy of a multinational enterprise