The emergence of multinational enterprises: Simulation results
AbstractIn the last decades, foreign direct investment (FDI) has increased strongly among industrialised countries. U.S. companies were the first to set up foreign affiliates followed later by companies from smaller industrialised countries. This paper develops a general equilibrium model of bidirectional intra-industry FDI between industrialised countries, in which this specific time pattern emerges. In contrast to the existing literature on FDI, this paper shows that falling transport costs first lead to increased FDI activities and only later to decreased FDI. Additionally, FDI is more likely to occur in industries with differentiated products, higher scale economies on company relative to plant level, smaller inputs of intermediate goods and more differentiated intermediate goods.
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 900.
Date of creation: 1998
Date of revision:
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
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- S. Lael Brainard, 1993. "A Simple Theory of Multinational Corporations and Trade with a Trade-Off Between Proximity and Concentration," NBER Working Papers 4269, National Bureau of Economic Research, Inc.
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- Jörn Kleinert, 2000. "Globalization of the World Economy: What Happened in 1985?," Kiel Working Papers 969, Kiel Institute for the World Economy.
- Jö Kleinert, 2001. "The Time Pattern of the Internationalization of Production," German Economic Review, Verein für Socialpolitik, vol. 2(1), pages 79-98, 02.
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