Export-Platform FDI: Cannibalization or Complementarity?

This paper develops a model of export-platform foreign direct investment (FDI) to analyze whether multinational enterprises’ foreign plants act as substitutes or complements. The authors show that this relationship depends on the balance between cross-firm demand elasticity and within-firm labor substitution across plants. The paper further demonstrates that complementarities among plants are strengthened when firms face shared fixed costs associated with exporting and input sourcing. The study contributes to understanding the organization of multinational production and the interaction between trade and foreign direct investment in global value chains.