01686cas a2200241 a 4500 AALejournalIMF006925 230101c9999 xx r poo 0 0eng d 5.00 USD 9781455211715 1018-5941 BD-DhAAL BD-DhAAL International Monetary Fund. Export Versus FDI in Services. Washington, D.C. : International Monetary Fund, 2010. 1 online resource (24 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students In the literature on exports and investment, most productive firms are seen to invest abroad. In the Helpman and others (2004) model, costs of transportation play a critical role in the decision about whether to serve foreign customers by exporting, or by producing abroad. We consider the case of tradable services, where the marginal cost of transport is near zero. We argue that in the purchase of services, buyers face uncertainty about product quality, especially when production is located far away. Firm optimisation then leads less productive firms to self-select themselves for FDI. We test this prediction with data from the Indian software industry and find support for it. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2010/290 Full text available on IMF http://elibrary.imf.org/view/journals/001/2010/290/001.2010.issue-290-en.xml IMF e-Library