Reputational Comparative Advantage and Multinational Enterprise
AbstractFor a firm without a readily identifiable brand name, quality reputation may solely reflect the country of origin. In this paper we endogenize country-of-origin reputations and show that these selffulfilling reputations determine not only the average quality of a country’s exports but also the type of products in which a country specializes. Hence, the pattern of international trade can be determined by reputational comparative advantage. Specialization according to reputational comparative advantage can also establish the location of the host and the parent firm in a multinational enterprise. Furthermore, multinationals that internalize production in a single firm can eradicate a low reputation equilibrium and, therefore, can increase host-country welfare by a greater amount than under a licensing arrangement. Finally, this reputation effect can identify whether internalization, or licensing, is more likely to occur.
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Bibliographic InfoPaper provided by Ryerson University, Department of Economics in its series Working Papers with number 016.
Length: 33 pages
Date of creation: Aug 2010
Date of revision:
Country-of-Origin; Quality Reputations; Multinational Enterprise; Internalization; Statistical Discrimination.;
Other versions of this item:
- Richard Chisik, 2002. "Reputational Comparative Advantage and Multinational Enterprise," Economic Inquiry, Western Economic Association International, vol. 40(4), pages 582-596, October.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
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- Stephen B. DeLoach & Jayoti Das, 2008.
"Resolving the Paradox of Social Standards and Export Competitiveness,"
2008-03, Elon University, Department of Economics.
- Stephen DeLoach & Jayoti Das, 2008. "Resolving the paradox of social standards and export competitiveness," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 17(4), pages 467-483.
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