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Economics of Scope, Agglomeration and Location of the Multinational Firm

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Author Info
José Pedro Pontes
John B. Parr

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Abstract

A classification of the locational patterns of firms (with economies of scope present) is outlined, in order to cast light on the location of the multiplant, multinational firm. This is driven by three forces: economies of scope that follow from the co-location of different activities; transportation costs of the final good; and factor mobility costs. It is concluded that the single-plant firm prevails when spatial economies of scope are strong in relation to either transportation or mobility costs. The vertical (horizontal) multiplant firm emerges when mobility costs of factors (transportation costs on the final good) are high. These two kinds of spatial costs, which are mutually exclusive, favor the formation of multinational firms.

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Publisher Info
Paper provided by Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon. in its series Working Papers with number 2004/04.

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Date of creation: 2004
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Handle: RePEc:ise:isegwp:wp42004

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Postal: Department of Economics, School of Economics and Management (ISEG), Technical University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL
Web page: http://www.iseg.utl.pt/departamentos/economia/

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Related research
Keywords: Economies of scope; Economies of agglomeration; Multiplant firms; Multinational firms.;

Find related papers by JEL classification:
R30 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - General
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

This paper has been announced in the following NEP Reports:

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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.:
  1. Horstmann, Ignatius J. & Markusen, James R., 1992. "Endogenous market structures in international trade (natura facit saltum)," Journal of International Economics, Elsevier, vol. 32(1-2), pages 109-129, February. [Downloadable!] (restricted)
  2. Ignatius J. Horstmann & James R. Markusen, 1990. "Endogenous Market Structures in International Trade," NBER Working Papers 3283, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. John B. Parr, 2004. "Economies of scope and economies of agglomeration: The Goldstein-Gronberg contribution revisited," The Annals of Regional Science, Springer, vol. 38(1), pages 1-11, 03. [Downloadable!] (restricted)
  4. Panzar, John C & Willig, Robert D, 1981. "Economies of Scope," American Economic Review, American Economic Association, vol. 71(2), pages 268-72, May. [Downloadable!] (restricted)
  5. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-71, June. [Downloadable!] (restricted)
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