International Product Life Cycle
I have already examined this theory, but there is a close relationship between international trade and international investment. The international product life cycle theory explains that foreign direct investment is a natural stage in the life of a product.
The Knickerbocker's follow-the-leader theory argued that, as risk minimizers, oligopolist, wishing to avoid destructive competition, would normally follow each other into (e.g., foreign) markets, to safeguard their own commercial interests.
This theory is considered defensive because competitors are investing to avoid losing the markets served by exports when their initial investor begins local production. They may also fear that the initiator will achieve some advantage of risk diversification that they will have unless they also enter the market.
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