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The Global Agglomeration of Multinational Firms

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Author Info

  • Laura Alfaro

    ()
    (Harvard Business School, Business, Government & the International Economy Unit)

  • Maggie Chen

    ()
    (George Washington University)

Abstract

The explosion of multinational activities in recent decades is rapidly transforming the global landscape of industrial production. But are the emerging clusters of multinational production the rule or the exception? What drives the offshore agglomeration of multinational firms in comparison to the agglomeration of domestic firms? Using a unique worldwide plant-level dataset that reports detailed location, ownership, and operation information for plants in over 100 countries, we construct a spatially continuous index of pairwise-industry agglomeration and investigate the patterns and determinants underlying the global economic geography of multinational firms. Our analysis presents new stylized facts that suggest the emerging offshore clusters of multinationals are not a simple reflection of domestic industrial clusters. Agglomeration economies including capital-good market externality and technology diffusion play a more important role in the offshore agglomeration of multinationals than the agglomeration of domestic firms. These findings remain robust when we address potential reverse causality by exploring the regional pattern and process of agglomeration.

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Bibliographic Info

Paper provided by Harvard Business School in its series Harvard Business School Working Papers with number 10-043.

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Length: 59 pages
Date of creation: Dec 2009
Date of revision: Apr 2014
Handle: RePEc:hbs:wpaper:10-043

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Keywords: multinational firm; agglomeration; location fundamentals; agglomeration economies;

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Cited by:
  1. Lorenzo Burlon, 2012. "How Do Aggregate Fluctuations Depend on the Network Structure of the Economy?," Working Papers in Economics 278, Universitat de Barcelona. Espai de Recerca en Economia.
  2. Serafinelli, Michel, 2013. "Good Firms, Worker Flows and Productivity," MPRA Paper 47508, University Library of Munich, Germany.
  3. Sun, Churen & Yu, Zhihao & Zhang, Tao, 2012. "Agglomeration and Trade with Heterogeneous Firms," MPRA Paper 49001, University Library of Munich, Germany, revised 17 Aug 2013.
  4. Carluccio, Juan & Fally, Thibault, 2013. "Foreign entry and spillovers with technological incompatibilities in the supply chain," Journal of International Economics, Elsevier, vol. 90(1), pages 123-135.
  5. William R. Kerr & Scott Duke Kominers, 2012. "Agglomerative Forces and Cluster Shapes," Working Papers 12-09, Center for Economic Studies, U.S. Census Bureau.

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