Advanced Search
MyIDEAS: Login to save this article or follow this journal

Physical capital, knowledge capital, and the choice between FDI and outsourcing

Contents:

Author Info

  • Yongmin Chen
  • Ignatius J. Horstmann
  • James R. Markusen

Abstract

There exist two approaches in the literature concerning the multinational firm's mode choice for foreign production between an owned subsidiary and a licensing contract. One approach considers environments where the firm transfers primarily knowledge-based assets and assumes that knowledge is non-excludable. A more recent approach takes the property-right view of the firm and assumes that physical capital is fully excludable. This paper combines both forms of capital assets in a single model. There are subtleties, and added structure is needed to establish what ex ante seems a straightforward testable hypothesis: relatively physical-capital-intensive firms choose outsourcing while relatively knowledge-capital-intensive firms choose FDI.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://economics.ca/cgi/xms?jab=v45n1/CJEv45n1p0001.pdf
File Function: Full text
Download Restriction: Available to subscribers only. Alternative access through JSTOR and Ingenta.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 45 (2012)
Issue (Month): 1 (February)
Pages: 1-15

as in new window
Handle: RePEc:cje:issued:v:45:y:2012:i:1:p:1-15

Contact details of provider:
Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
Email:
Web page: http://economics.ca/cje/
More information through EDIRC

Order Information:
Email:
Web: http://economics.ca/en/membership.php

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Robert C. Feenstra & Gordon H. Hanson, 2004. "Ownership and Control in Outsourcing to China: Estimating the Property-Rights Theory of the Firm," NBER Working Papers 10198, National Bureau of Economic Research, Inc.
  2. James R. Markusen, 1998. "Contracts, Intellectual Property Rights, and Multinational Investment in Developing Countries," NBER Working Papers 6448, National Bureau of Economic Research, Inc.
  3. Pol Antras, 2004. "Incomplete Contracts and the Product Cycle," 2004 Meeting Papers 19, Society for Economic Dynamics.
  4. Morck, R. & Yeung, B., 1991. "Why Investors Value Multinationality," Working Papers 282, Research Seminar in International Economics, University of Michigan.
  5. Pol Antràs, 2003. "Firms, Contracts, And Trade Structure," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1375-1418, November.
  6. Fosfuri, Andrea & Motta, Massimo & Rønde, Thomas, 1999. "Foreign Direct Investment and Spillovers through Workers' Mobility," CEPR Discussion Papers 2194, C.E.P.R. Discussion Papers.
  7. Ignatius Horstmann & James R. Markusen, 1987. "Licensing versus Direct Investment: A Model of Internalization by the Multinational Enterprise," Canadian Journal of Economics, Canadian Economics Association, vol. 20(3), pages 464-81, August.
  8. Ethier, Wilfred J. & Markusen, James R., 1996. "Multinational firms, technology diffusion and trade," Journal of International Economics, Elsevier, vol. 41(1-2), pages 1-28, August.
  9. Oliver Hart & John Moore, 1988. "Property Rights and the Nature of the Firm," Working papers 495, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. repec:fth:michin:282 is not listed on IDEAS
  11. Grossman, Sanford J. & Hart, Oliver D., 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Scholarly Articles 3450060, Harvard University Department of Economics.
  12. Mansfield, Edwin & Romeo, Anthony, 1980. "Technology Transfer to Overseas Subsidiaries by U.S.-Based Firms," The Quarterly Journal of Economics, MIT Press, vol. 95(4), pages 737-50, December.
  13. Morck, Randall & Yeung, Bernard, 1992. "Internalization : An event study test," Journal of International Economics, Elsevier, vol. 33(1-2), pages 41-56, August.
  14. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, December.
  15. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
  16. Glass, Amy Jocelyn & Saggi, Kamal, 2002. " Multinational Firms and Technology Transfer," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(4), pages 495-513, December.
  17. Davidson, W H & McFetridge, Donald G, 1984. "International Technology Transactions and the Theory of the Firm," Journal of Industrial Economics, Wiley Blackwell, vol. 32(3), pages 253-64, March.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Karpaty, Patrik & Gustavsson Tingvall, Patrik, 2011. "Offshoring of Services and Corruption: Do Firms Escape Corrupt Countries?," Working Papers 2011:2, Örebro University, School of Business, revised 28 May 2012.
  2. JINJI Naoto & ZHANG Xingyuan & HARUNA Shoji, 2011. "Does Tobin's q Matter for Firms' Choices of Globalization Mode?," Discussion papers 11061, Research Institute of Economy, Trade and Industry (RIETI).
  3. Heyman, Fredrik & Gustavsson Tingvall, Patrik, 2012. "The Dynamics of Offshoring and Institutions," Ratio Working Papers 190, The Ratio Institute.
  4. KWON Hyeog Ug, 2012. "Offshoring of Japanese Small and Medium Enterprises (Japanese)," Discussion Papers (Japanese) 12004, Research Institute of Economy, Trade and Industry (RIETI).
  5. Tingvall, Patrik, 2011. "Dynamic Effects of Corruption on Offshoring," Ratio Working Papers 182, The Ratio Institute.
  6. Antràs, Pol, 2011. "Grossman-Hart (1986) Goes Global: Incomplete Contracts, Property Rights, and the International Organization of Production," CEPR Discussion Papers 8598, C.E.P.R. Discussion Papers.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cje:issued:v:45:y:2012:i:1:p:1-15. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Prof. Werner Antweiler).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.