A firm is more likely to engage in horizontal foreign direct investment if

Question

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Horizontal foreign direct investment involves a company expanding its operations to foreign countries by establishing subsidiaries that produce the same products as the parent company. This type of investment is more likely when trade costs are high as importing products becomes more expensive. Also, internal economies of scale allow the firm to increase production and reduce costs per unit. Thus, the combination of high trade costs and internal economies of scale makes the firm more likely to engage in horizontal foreign direct investment.

A Firm Is More Likely to Engage in Horizontal Foreign