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Organization of Multinational Activities and Ownership Structure

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Author Info
Christian Mugele (Munich Graduate School of Economics, Kaulbachstraße 45, D-80539 Munich, Germany, Tel.: +49 89 2180 3903. Christian.Mugele@lrz.uni-muenchen.de)
Monika Schnitzer (Department of Economics, University of Munich, Akademiestraße 1/III, 80799 Munich, Germany, Tel.: +49 89 2180 2217. schnitzer@lrz.uni-muenchen.de)

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Abstract

We develop a model in which multinational investors decide about the modes of organization, the locations of production, and the markets to be served. Foreign investments are driven by market-seeking and cost-reducing motives. We further assume that investors face costs of control that vary among sectors and increase in distance. The results show that (i) production intensive sectors are more likely to operate a foreign business independent of the investment motive, (ii) that distance may have a non-monotonous effect on the likelihood of horizontal investments, and (iii) that globalization, if understood as reducing distance, leads to more integration.

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Publisher Info
Paper provided by SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Papers with number 98.

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Date of creation: Feb 2006
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Handle: RePEc:trf:wpaper:98

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Related research
Keywords: Multinational firms; Joint ventures; Distance; Technology spillovers; Ownership structure;

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Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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