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 to measure the significance and extent of agglomeration between multinational firms. Our analysis indicates that multinationals' agglomeration goes above and beyond first-nature driven geographic concentration due to market size, comparative advantage, and trade costs. Second-nature forces including knowledge spillovers, capital-market externalities, and vertical production linkages also play a significant role. In comparison to domestic plants, knowledge spillovers and capital market externalities exert a stronger impact on multinational firms while labor market pooling has a weaker effect. These findings remain robust when we examine entry decisions and explore the process of agglomeration.
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Bibliographic InfoPaper provided by Harvard Business School in its series Harvard Business School Working Papers with number 10-043.
Length: 44 pages
Date of creation: Dec 2009
Date of revision: Apr 2010
multinational firm; agglomeration; first 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.
- Maggie Xiaoyang Chen & Laura Alfaro, 2010. "The Global Agglomeration of Multinational Firms," Working Papers 2010-16, The George Washington University, Institute for International Economic Policy.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-10 (All new papers)
- NEP-CSE-2010-01-10 (Economics of Strategic Management)
- NEP-NET-2010-01-10 (Network Economics)
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- 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.
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"Agglomerative Forces and Cluster Shapes,"
NBER Working Papers
16639, National Bureau of Economic Research, Inc.
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- Serafinelli, Michel, 2013.
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- 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.
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