Initiating foreign direct investment (FDI) is expensive for multinational firms due to the need to adapt to new business practices, ethical norms, and regulations in a foreign country. This paper examines how such adaptation costs affect firms' FDI decisions in current and subsequent periods. We develop a dynamic structural model of how firms make sequential decisions regarding where to invest. Using unique data covering all German firms' FDI from 2002 to 2009, we estimate the model that allows for country-specific adaptation costs and firms' heterogeneous preferences for location attributes. The estimation results suggest that the adaptation costs are statistically and economically significant, ranging from 0.9% to 22.4% of a firm's average expected discounted profits. If adaptation costs were completely subsidized, firms' FDI location choices would change drastically. Moreover, the average expected discounted profit would increase by 10.9%, not only because of the reduction in adaptation costs but more importantly, due to better matching between firms and locations.

中文翻译：

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量化连续 FDI 地点选择中的适应成本：来自德国企业的证据

由于需要适应外国新的商业实践、道德规范和法规，跨国公司发起外国直接投资 (FDI) 的成本高昂。本文探讨了这种适应成本如何影响企业当前和后续时期的外国直接投资决策。我们开发了一个动态结构模型，用于说明企业如何做出有关投资地点的连续决策。使用涵盖 2002 年至 2009 年所有德国企业 FDI 的独特数据，我们估计了考虑到特定国家适应成本和企业对位置属性的异质偏好的模型。估计结果表明，适应成本在统计和经济上都具有显着性，占企业平均预期贴现利润的 0.9% 到 22.4%。如果适应成本得到完全补贴，企业的外国直接投资地点选择将发生巨大变化。此外，平均预期贴现利润将增加10.9%，这不仅是因为适应成本的降低，更重要的是由于企业和地点之间更好的匹配。