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A note on agglomeration and the location of multinational firms

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  • José Pedro Pontes
  • John B. Parr

Abstract

A classification of the locational patterns of firms (with economies of scale and scope present) is outlined in order to shed light on the location of the multiplant, multinational firm, which is driven by three forces: spatial economies of scale and scope that follow from the co-location of different activities sharing a common fixed input; transportation costs on the final good; and factor-mobility costs. We conclude that the single-plant firm prevails when spatial economies of scale and scope are pronounced, while multi-plant firms emerge when spatial economies of scale and scope are weak. However, the vertical multinational firm is to be found when transportation costs on the finished good are low, whereas the horizontal multinational firm emerges when these costs are high. The vertical multinational thus appears as the limit in the evolution of the market structure for most consumer goods. Copyright RSAI 2005.

Suggested Citation

  • José Pedro Pontes & John B. Parr, 2005. "A note on agglomeration and the location of multinational firms," Papers in Regional Science, Wiley Blackwell, vol. 84(3), pages 509-518, August.
  • Handle: RePEc:bla:presci:v:84:y:2005:i:3:p:509-518
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    References listed on IDEAS

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    1. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, January.
    2. Markusen, James R. & Venables, Anthony J. & Eby Konan, Denise & Zhang, Kevin H., 1996. "A Unified Treatment of Horizontal Direct Investment, Vertical Direct Investment, and the Pattern of Trade in Goods and Services," Working Paper Series 465, Research Institute of Industrial Economics.
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    Cited by:

    1. Broll, Udo & Roldán-Ponce, Antonio & Wahl, Jack E., 2007. "Barriers to Diversification and Regional Allocation of Capital," Dresden Discussion Paper Series in Economics 14/07, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    2. Henry Wai-Chung Yeung, 2009. "Transnational Corporations, Global Production Networks, and Urban and Regional Development: A Geographer's Perspective on "Multinational Enterprises and the Global Economy"," Growth and Change, Wiley Blackwell, vol. 40(2), pages 197-226.

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