Batch process and transfer decisions in foreign market: a real options model

This investigation extends the constant elasticity of substitution (CES) batch process production model of Lin et al. (J. Management syst. 2002; 9: 173) for an uncertain exchange rate by considering an export-oriented manufacturer who can decide to switch freely between domestic and foreign locations. The export-oriented manufacturer is risk averse and has rational expectations. As the entry cost declines, the export-oriented manufacturer's entry trigger for the CES production function increases for transferring from a domestic and to a foreign location. Additionally, the manufacturer's exit trigger for CES production function increases for transferring from a foreign and to a domestic location. Moreover, the exit cost resembles the entry cost. Copyright © 2002 John Wiley & Sons, Ltd.