International Taxation and Initial Foreign Entries

In a global business environment, U.S. firms look towards expansion as a way to stay competitive in the market place. When deciding where to expand, U.S. firms analyze a variety of factors ranging from market size and demographics to location. Research has shown that foreign taxes affect FDI, however, other research shows that many companies are not taking the necessary tax planning steps. Using a combination of survey and secondary data, I analyze the effect of statutory tax rates on firm’s initial entries – where (to which country), how (using which entry modes), and when (how soon after firm founding). Early results suggest that statutory tax rates influence where firms make their first entry, but not when. Contrary to prior research, I do not find an effect of tax rates on mode of entry.