Why do firms locate production overseas rather than exporting finished goods?

Question

Quizplus · Accepted Answer

There are multiple reasons why firms may choose to locate production overseas instead of exporting finished goods. Shipping costs can make exporting expensive, so producing locally can be more cost-effective. Firms may also want to extend their corporate control overseas by owning and operating their own production facilities. Imperfect factor markets, such as the availability and cost of labor and raw materials, can also make it more advantageous to produce locally rather than export. Therefore, all of the options listed could contribute to a firm's decision to locate production overseas instead of exporting finished goods.

Why Do Firms Locate Production Overseas Rather Than Exporting Finished