Reversing the Perspective: Multinationals from Middle-Income Countries
AbstractI study the internal organization of production between the parent and the affiliate in the multinational corporation (MNC) and the extent to which it depends on the factor abundance of the destination country of the affiliates relative to the home country. I use a unique South Korean firm-level panel dataset that has affiliates that are almost evenly divided between countries that are more and less capital abundant than South Korea. I find that the capital intensity of South Korean parents drops as a MNC has affiliates in increasingly more capital-abundant countries; it increases as the MNC shifts its activities towards increasingly labour-abundant countries. This result suggests that factor price differences matter for how MNCs organize their internal production, a basic prediction of the factor proportions view of the MNC. At the same time, my results complement market access or tariff-jumping motivations for outward investment decisions. Even when market access and tariff-jumping are important determinants of MNCs shifting (outward) investment decisions, my results suggest that MNCs will relocate more labour-intensive activities to more labour-abundant countries and more capital-intensive activities to capital-abundant countries whenever there are factor price differences, which extends the factor proportions view of the MNC as studied by Helpman (1984,1985) and Helpman and Krugman (1985).
Download InfoIf 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.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4435.
Date of creation: Jun 2004
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Find related papers by JEL classification:
- F10 - International Economics - - Trade - - - General
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Kokko, Ari, 2006. "The Home Country Effects Of Fdi In Developed Economies," EIJS Working Paper Series 225, The European Institute of Japanese Studies.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.