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Interdependence in multinational production networks

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  • Maggie Xiaoyang Chen

Abstract

Most multinational firms today operate multilateral production networks. Most existing empirical analyses, however, have focused on firms' choice between producing at home and investing overseas. This paper uses detailed French multinational subsidiary data to examine the effect of existing production networks on multinationals' entry decisions. The paper finds strong horizontal and vertical interdependence across multinationals' foreign production locations, but little interdependence between home and foreign production when third-country effects are taken into account. This result constitutes a sharp contrast to the conventional emphasis and highlights the importance of investigating foreign direct investment in the context of multinational production networks.

Suggested Citation

  • Maggie Xiaoyang Chen, 2011. "Interdependence in multinational production networks," Canadian Journal of Economics, Canadian Economics Association, vol. 44(3), pages 930-956, August.
  • Handle: RePEc:cje:issued:v:44:y:2011:i:3:p:930-956
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    Cited by:

    1. Debaere, Peter & Lee, Hongshik & Lee, Joonhyung, 2013. "Language, ethnicity and intrafirm trade," Journal of Development Economics, Elsevier, pages 244-253.
    2. Alfaro, Laura & Chen, Maggie Xiaoyang, 2014. "The global agglomeration of multinational firms," Journal of International Economics, Elsevier, vol. 94(2), pages 263-276.
    3. Laura Alfaro & Maggie X. Chen, 2017. "Transportation Cost and the Geography of Foreign Investment," Harvard Business School Working Papers 17-061, Harvard Business School.
    4. Fillat, José L. & Garetto, Stefania & Oldenski, Lindsay, 2015. "Diversification, cost structure, and the risk premium of multinational corporations," Journal of International Economics, Elsevier, pages 37-54.

    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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