The Global Agglomeration of Multinational Firms
AbstractThe proliferation of multinational activities has led to the emergence of new industrial clusters around the world. In this paper, we examine how "first nature" location fundamentals and "second nature" agglomeration economies jointly determine the global landscape of multinational firms. Using a unique worldwide plant dataset that reports detailed location, ownership, and operation information for plants in more than 100 countries, we construct a spatially continuous index of global agglomeration and investigate the patterns and determinants of clustering between multinational firms. Our analysis indicates that multinationals' agglomeration goes above and beyond first-nature driven geographic concentration. Second-nature forces including knowledge spillovers, capital-market externalities, and vertical production linkages play a significant role. In comparison to domestic plants, knowledge spillovers and capital market externalities exert a stronger effect on the clustering of multinational firms while labor market pooling has a weaker impact. These findings remain robust when we examine entry decisions and explore the process of agglomeration.
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Bibliographic InfoPaper provided by The George Washington University, Institute for International Economic Policy in its series Working Papers with number 2010-16.
Length: 45 pages
Date of creation: Jun 2010
Date of revision:
Publication status: Published in Harvard Business School BGIE Unit Working Paper No. 10-043
Multinational firm; agglomeration; first nature; second nature; input-output linkage; knowledge spillover; factor market externality;
Other versions of this item:
- Laura Alfaro & Maggie Chen, 2009. "The Global Agglomeration of Multinational Firms," NBER Working Papers 15576, National Bureau of Economic Research, Inc.
- Laura Alfaro & Maggie Chen, 2009. "The Global Agglomeration of Multinational Firms," Harvard Business School Working Papers 10-043, Harvard Business School, revised Apr 2014.
- F2 - International Economics - - International Factor Movements and International Business
- D2 - Microeconomics - - Production and Organizations
- R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
- R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
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