The Optimal Entry Mode of the Multinational Firm under Network Externalities: Foreign Direct Investment and Tariff

Abstract

In the generation of frequent interaction internationally and booming internet, the commodity with network externalities in international trade has been spotted all the time. In this paper, we analyze how the multinational firms producing goods with network externalities choose the optimal entry mode between foreign direct investment and exporting. We found out that the technical advantages are the key factors for multinational firms to choose the entry modes.