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Multinationals without Advantages

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  • Andrea Fosfuri
  • Massimo Motta

Abstract

We question the widespread argument that firms embarking on foreign direct investments must possess some specific advantages to offset the penalties of operating across national and cultural boundaries. A simple model shows that firms might invest abroad to capture local advantages through geographical proximity of plant location, rather than to exploit existing ones. Because of spatially bounded spillovers, laggard firms might use foreign investments to acquire location‐specific knowledge, whereas leading firms might prefer costly exports to avoid the dissipation of their advantages. JEL classification: F23; O32; L22

Suggested Citation

  • Andrea Fosfuri & Massimo Motta, 1999. "Multinationals without Advantages," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(4), pages 617-630, December.
    • Handle: RePEc:bla:scandj:v:101:y:1999:i:4:p:617-630
    DOI: 10.1111/1467-9442.00176
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    1. Magnus Blomström & Ari Kokko & Mario Zejan, 2000. "Multinational Corporations and Spillovers," Palgrave Macmillan Books, in: Foreign Direct Investment, chapter 8, pages 101-133, Palgrave Macmillan.
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    4. Neven, D. & Siotis, G., 1996. "Technology sourcing and FDI in the EC: An empirical evaluation," International Journal of Industrial Organization, Elsevier, vol. 14(5), pages 543-560, July.
    5. Motta, Massimo, 1994. "International trade and investments in a vertically differentiated industry," International Journal of Industrial Organization, Elsevier, vol. 12(2), pages 179-196, June.
    6. S. Lael Brainard, 1993. "An Empirical Assessment of the Proximity-Concentration Tradeoff between Multinational Sales and Trade," NBER Working Papers 4580, National Bureau of Economic Research, Inc.
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    More about this item

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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