Multinational Enterprises and Tobin´s q: The Implications for Foreign Direct Investment

Abstract

This paper constructs a theoretical model of investment decision abroad supporting the idea that the Multinational Enterprises’ internalization decision is influenced by the capital installation cost. This modification alters MNE’s investment behavior. Using the idea that capital mobility across countries is associated with the capital installation cost then the firm’s maximization problem may also incorporate the Tobin’s q in a modified fashion.Multinational Enterprises, Foreign Direct Investment, Tobin’s q.