In this paper we analyse the impact of policy uncertainty on foreign direct investment strategies. The paper follows the real options approach, which allows to investigate the value to a firm of waiting to invest and/or disinvest, when payoffs are stochastic due to political uncertainty and investments are partially reversible. Across the board we find that political uncertainty can be very detrimental to FDI decisions.
|Name||Dundee Discussion Papers in Economics|
|Publisher||University of Dundee|
- Real options
- Foreign direct investment
- Political uncertainty