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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 in which multinational investors decide about the modes of organization, the locations of production, and the markets to be served. Foreign investments are driven by market-seeking and cost-reducing motives. We further assume that investors face costs of control that vary among sectors and increase in distance. The results show that (i) production intensive sectors are more likely to operate a foreign business independent of the investment motive, (ii) that distance may have a non-monotonous effect on the likelihood of horizontal investments, and (iii) that globalization, if understood as reducing distance, leads to more integration.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5592.

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Date of creation: Mar 2006
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Handle: RePEc:cpr:ceprdp:5592

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Related research
Keywords: distance joint ventures multinational firms ownership structure technology spillovers

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Find related papers by JEL classification:
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

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