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Firm-Specific Assets and the Gains from Direct Foreign Investment

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  • Horstmann, Ignatius J
  • Markusen, James R

Abstract

It is widely held that multinational enterprises arise as a consequence of the existence of knowledge-based, firm-specific assets such as superior technology or management know-how. These assets are much like public goods within the firm in that they can be costlessly supplied to additional plants, thus leading to the efficiency of multiplant production. Foreign direct investment then consists of supplying the services of the assets to foreign operations and repatriated earnings are payments for these services. These notions are formalized in a simple model of the multinational enterprise and welfare implications are analyzed. Copyright 1989 by The London School of Economics and Political Science.

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Bibliographic Info

Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 56 (1989)
Issue (Month): 221 (February)
Pages: 41-48

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Handle: RePEc:bla:econom:v:56:y:1989:i:221:p:41-48

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Citations

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Cited by:
  1. Aitken, Brian & Harrison, Ann & DEC, 1994. "Do domestic firms benefit from foreign direct investment? Evidence from panel data," Policy Research Working Paper Series 1248, The World Bank.
  2. Lawrence Kaufmann, 1997. "A Model of Spillovers Through Labor Recruitment," International Economic Journal, Taylor & Francis Journals, vol. 11(3), pages 13-33.
  3. Chen , Taotao & Kokko, Ari & Gustavsson Tingvall, Patrik, 2010. "Fdi And Spillovers In China: Non-Linearity And Absorptive Capacity," Working Paper Series 2010-12, China Economic Research Center, Stockholm School of Economics.
  4. Linda Goldberg, 2004. "Financial-Sector FDI and Host Countries: New and Old Lessons," NBER Working Papers 10441, National Bureau of Economic Research, Inc.
  5. Richard Kneller & Edward Manderson, . "Environmental Regulations, Outward FDI and Heterogeneous Firms: Are Countries Used as Pollution Havens?," Discussion Papers 09/28, University of Nottingham, GEP.
  6. Denise Eby Konan, 1996. "The Vertical Multinational Enterprise and International Trade," Working Papers 199601, University of Hawaii at Manoa, Department of Economics.
  7. Linda Goldberg, 2004. "Financial-sector foreign direct investment and host countries: new and old lessons," Staff Reports 183, Federal Reserve Bank of New York.
  8. Janis Kapler, . "The Theory of the Firm, the Theory of Competition and the Transnational Corporation," Working Papers 6, University of Massachusetts Boston, Economics Department.
  9. Gunnar A. Eskeland & Ann E. Harrison, 2002. "Moving to Greener Pastures? Multinationals and the Pollution Haven Hypothesis," NBER Working Papers 8888, National Bureau of Economic Research, Inc.
  10. Forssbæck , Jens & Oxelheim, Lars, 2008. "Financial Determinants of Foreign Direct Investment," Working Paper Series 741, Research Institute of Industrial Economics.
  11. Wegberg, M.J.A.M. & Witteloostuijn, A. van, 1992. "Credible entry threats into contestable markets: a multimarket model of contestability," Open Access publications from Tilburg University urn:nbn:nl:ui:12-5373412, Tilburg University.
  12. Marek Kapička, 2012. "How Important Is Technology Capital for the United States?," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(2), pages 218-48, April.
  13. Gerda Dewit, 1998. "Risky Business: Intra-Firm Trade with Foreign Commercial Risk and Asymmetric Insurance," Working Papers 9808, Business School - Economics, University of Glasgow.
  14. Hagen, James M., 1997. "Food Processing Firms And Foreign Production Incentives," Working Papers 14314, University of Minnesota, The Food Industry Center.
  15. Gilroy, Bernard Michael, 1998. "International Competitiveness, Multinational Enterprise Technology Clubs and the Government Interface," MPRA Paper 17983, University Library of Munich, Germany.
  16. Gilroy, Bernard Michael, 1999. "Beschäftigungswirkungen multinationaler Unternehmungen
    [Employment effects of multinational enterprises]
    ," MPRA Paper 21079, University Library of Munich, Germany.
  17. Michael Fung, 1994. "Technology policies, technology transfer by multinational enterprises and R&D activities in LDCs," Open Economies Review, Springer, vol. 5(3), pages 275-287, July.
  18. Leung, W. -F., 1998. "A model of coexistence of international joint ventures and foreign wholly-owned subsidiaries," Japan and the World Economy, Elsevier, vol. 10(2), pages 233-252, April.
  19. Forssbæck, Jens & Oxelheim, Lars, 2011. "Corporate financial determinants of foreign direct investment," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(3), pages 269-282, June.

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