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In a set-up with intermediate production, the authors analyze how a shipper's choice of transport technology, traditional versus modern, interacts with the mode of foreign expansion by a service firm, export versus Foreign Direct Investment (FDI). In terms of the mode of foreign expansion by the service firm, they obtain that: due to trade in intermediate goods, trade and FDI can be complements; the export strategy dominates when the economies of scale at plant level are high and trade costs are low; the FDI strategy is preferable when market size is large and trade costs are intermediate.
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