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Organization of multinational activities and ownership structure

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Author Info
Mugele, Christian
Schnitzer, Monika

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Abstract

We develop a model of a multinational firm serving a foreign market that needs to decide about the location of production and the optimal ownership structure. We study how the location decision and the ownership choice interact, how these decisions are affected by (cultural) distance and how they depend on industry characteristics. Our analysis shows that (i) distance leads to less integration in low tech, but tends to lead to more integration in high tech industries, (ii) distance may have a non-monotonous effect on the likelihood of horizontal investments as opposed to exports, and (iii) marketing intensive industries are relatively more likely to produce close to their customers.

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File URL: http://www.sciencedirect.com/science/article/B6V8P-4RNR6V3-1/2/c9021b1a5e697e484acea32d00a5d606
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Publisher Info
Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 26 (2008)
Issue (Month): 6 (November)
Pages: 1274-1289
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Handle: RePEc:eee:indorg:v:26:y:2008:i:6:p:1274-1289

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Web page: http://www.elsevier.com/locate/inca/505551

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Related research
Keywords: Multinational firms Joint ventures Distance Technology spillovers Ownership structure;

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References listed on IDEAS
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  1. Brainard, S Lael, 1997. "An Empirical Assessment of the Proximity-Concentration Trade-off between Multinational Sales and Trade," American Economic Review, American Economic Association, vol. 87(4), pages 520-44, September. [Downloadable!] (restricted)
  2. repec:rus:hseeco:121605 is not listed on IDEAS
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  4. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August. [Downloadable!] (restricted)
    Other versions:
  5. Keith Head & Thierry Mayer, 2004. "Market Potential and the Location of Japanese Investment in the European Union," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 959-972, 01. [Downloadable!] (restricted)
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  6. Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany. [Downloadable!]
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  7. Muller, Thomas & Schnitzer, Monika, 2006. "Technology transfer and spillovers in international joint ventures," Journal of International Economics, Elsevier, vol. 68(2), pages 456-468, March. [Downloadable!] (restricted)
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  8. Raff, Horst & Ryan, Michael & Stähler, Frank, 2005. "Asset Ownership and Foreign-Market Entry," Economics Working Papers 2006,01, Christian-Albrechts-University of Kiel, Department of Economics. [Downloadable!]
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  9. James E. Rauch, 2001. "Business and Social Networks in International Trade," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1177-1203, December. [Downloadable!] (restricted)
  10. Yeaple, Stephen Ross, 2003. "The complex integration strategies of multinationals and cross country dependencies in the structure of foreign direct investment," Journal of International Economics, Elsevier, vol. 60(2), pages 293-314, August. [Downloadable!] (restricted)
  11. Dalia Marin, 2005. "A New International Division of Labor in Europe: Outsourcing and Offshoring to Eastern Europe," Discussion Papers 80, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
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  12. Laura Alfaro & Sebnem Kalemli-Ozcan & Vadym Volosovych, 2005. "Capital Flows in a Globalized World: The Role of Policies and Institutions," NBER Working Papers 11696, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Gordon H. Hanson & Raymond J. Mataloni & Matthew J. Slaughter, 2003. "Vertical Production Networks in Multinational Firms," NBER Working Papers 9723, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. Nakamura, M. & Xie, J., 1998. "Nonverifiability, noncontractibility and ownership determination models in foreign direct investment, with an application to foreign operations in Japan," International Journal of Industrial Organization, Elsevier, vol. 16(5), pages 571-599, September. [Downloadable!] (restricted)
  15. Grossman, Gene & Helpman, Elhanan, 2003. "Managerial Incentives and the International Organization of Production," CEPR Discussion Papers 3737, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  16. Claudia M. Buch & Jörn Kleinert & Alexander Lipponer & Farid Toubal, 2005. "Determinants and effects of foreign direct investment: evidence from German firm-level data," Economic Policy, CEPR, CES, MSH, vol. 20(41), pages 52-110, 01. [Downloadable!] (restricted)
  17. De Santis, Roberto A. & Stahler, Frank, 2004. "Endogenous market structures and the gains from foreign direct investment," Journal of International Economics, Elsevier, vol. 64(2), pages 545-565, December. [Downloadable!] (restricted)
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  18. Helen Louri & Raymond Loufir & Marina Papanastassiou, 2002. "Foreign Investment and Ownership Structure: An Empirical Analysis," Empirica, Springer, vol. 29(1), pages 31-45, March. [Downloadable!] (restricted)
  19. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June. [Downloadable!] (restricted)
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  20. Eicher, Theo & Kang, Jong Woo, 2005. "Trade, foreign direct investment or acquisition: Optimal entry modes for multinationals," Journal of Development Economics, Elsevier, vol. 77(1), pages 207-228, June. [Downloadable!] (restricted)
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  21. Desai, Mihir A. & Foley, C. Fritz & Hines, James Jr., 2004. "The costs of shared ownership: Evidence from international joint ventures," Journal of Financial Economics, Elsevier, vol. 73(2), pages 323-374, August. [Downloadable!] (restricted)
  22. Chu-Chia S. Lin & Ivan Png, 2003. "Monitoring costs and the mode of international investment," Journal of Economic Geography, Oxford University Press, vol. 3(3), pages 261-274, July.
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