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Foreign firm entry in an open economy: the case of Portugal

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The purpose of this paper is to analyse the entry process of foreign direct investment (FDI) in Portuguese industrial sectors. Portugal presents an interesting case where firms enter to take advantage of export opportunities. The results suggest that foreign firms possess the ability to overcome existing entry barriers that affect domestic firms. Apparently, foreign firms have different expectations about profitability than domestic firms, possibly due to foreign firms' export-orientation to the rest of the European Union (EU). They appear to desire industries where other foreign firms have clustered. Above all, it appears that these foreign firms enter industries to exploit Portugal's chief location advantage in Western Europe: low wages. Portugal's FDI experience is relevant to other countries that have opened their economies to greater trade and investment and attracted export-oriented firms.
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Document Type: Research Article

Affiliations: 1: Escola de Economia e Gestão NIMA Universidade do Minho Braga Portugal 2: CEMPRE Escola de Economia e Gestão Universidade do Minho Braga Portugal 3: Department of Economics University of South Carolina Columbia SC USA

Publication date: 2004-03-01

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