Third Country Effects in Multinational Production Networks
AbstractThe majority of multinational firms today operate a multilateral production network. Most existing empirical analyses have, however, focused on firms' choice between producing at home and investing overseas and assumed a firm's decision to invest in a foreign country is independent of its locations in third countries. This paper extends the literature by examining the effect of existing production network on multinationals' entry decision. Using detailed French multinational subsidiary-level data, the paper finds strong evidence of horizontal and vertical interdependence across multinationals' foreign production locations. There is, however, little evidence of horizontal interdependence between home-country production and foreign investment when the third-country effects are taken into account, constituting a sharp contrast to the conventional emphasis. This result is robust to the various specifications and sensitivity analyses undertaken in the paper, and suggests the importance of investigating the causes and effects of foreign direct investment in the context of multinational production network
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 The George Washington University, Institute for International Economic Policy in its series Working Papers with number 2009-01.
Length: 36 pages
Date of creation: Mar 2009
Date of revision:
multinational firm; production network; interdependence; entry decision; trade cost; input-output linkage;
Find related papers by JEL classification:
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
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.:
- Baltagi, Badi H. & Egger, Peter & Pfaffermayr, Michael, 2007.
"Estimating models of complex FDI: Are there third-country effects?,"
Journal of Econometrics,
Elsevier, vol. 140(1), pages 260-281, September.
- Badi H. Baltagi & Peter Egger & Michael Pfaffermayr, 2005. "Estimating Models of Complex FDI: Are There Third-Country Effects?," Center for Policy Research Working Papers 73, Center for Policy Research, Maxwell School, Syracuse University.
- Chen, Maggie X., 2009.
"Regional economic integration and geographic concentration of multinational firms,"
European Economic Review,
Elsevier, vol. 53(3), pages 355-375, April.
- Maggie X. Chen, 2008. "Regional Economic Integration and Geographic Concentration of Multinational Firms," Working Papers 2009-07, The George Washington University, Institute for International Economic Policy.
- Puga, Diego & Venables, Anthony J., 1995.
"Preferential Trading Arrangements and Industrial Location,"
CEPR Discussion Papers
1309, C.E.P.R. Discussion Papers.
- Puga, Diego & Venables, Anthony J., 1997. "Preferential trading arrangements and industrial location," Journal of International Economics, Elsevier, vol. 43(3-4), pages 347-368, November.
- Karolina Ekholm & Rikard Forslid & James R. Markusen, 2007.
"Export-Platform Foreign Direct Investment,"
Journal of the European Economic Association,
MIT Press, vol. 5(4), pages 776-795, 06.
- Jim Markusen & Caroline Ekholm, Rikard Forslid, 2005. "Export-Platform Foreign Direct Investment," The Institute for International Integration Studies Discussion Paper Series iiisdp050, IIIS.
- Ekholm, Karolina & Forslid, Rikard & Markusen, James R., 2003. "Export-Platform Foreign Direct Investment," CEPR Discussion Papers 3823, C.E.P.R. Discussion Papers.
- Karolina Ekholm & Rikard Forslid & James Markusen, 2003. "Export-Platform Foreign Direct Investment," NBER Working Papers 9517, National Bureau of Economic Research, Inc.
- Bruce A. Blonigen & Ronald B. Davies & Glen R. Waddell & Helen T. Naughton, 2004.
"FDI in Space: Spatial Autoregressive Relationships in Foreign Direct Investment,"
NBER Working Papers
10939, National Bureau of Economic Research, Inc.
- Blonigen, Bruce A. & Davies, Ronald B. & Waddell, Glen R. & Naughton, Helen T., 2007. "FDI in space: Spatial autoregressive relationships in foreign direct investment," European Economic Review, Elsevier, vol. 51(5), pages 1303-1325, July.
- Markusen, James R. & Venables, Anthony J., 2000.
"The theory of endowment, intra-industry and multi-national trade,"
Journal of International Economics,
Elsevier, vol. 52(2), pages 209-234, December.
- Markusen, James R. & Venables, Anthony J., 1996. "The Theory of Endowment, Intra-Industry and Multinational Trade," CEPR Discussion Papers 1341, C.E.P.R. Discussion Papers.
- James R. Markusen & Anthony J. Venables, 1996. "The Theory of Endowment, Intra-Industry, and Multinational Trade," NBER Working Papers 5529, National Bureau of Economic Research, Inc.
- Head, Charles Keith & Mayer, Thierry, 2002.
"Market Potential and the Location of Japanese Investment in the European Union,"
CEPR Discussion Papers
3455, C.E.P.R. Discussion Papers.
- 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, November.
- Motta, Massimo & Norman, George, 1996.
"Does Economic Integration Cause Foreign Direct Investment?,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 757-83, November.
- Massimo Motta & George Norman, 1993. "Does economic integration cause foreign direct investment?," Economics Working Papers 28, Department of Economics and Business, Universitat Pompeu Fabra.
- Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kyle Renner).
If references are entirely missing, you can add them using this form.