IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Physical capital, knowledge capital, and the choice between FDI and outsourcing

  • Yongmin Chen
  • Ignatius J. Horstmann
  • James R. Markusen

There exist two approaches in the literature concerning the multinational firm's mode choice for foreign production between an owned subsidiary and a licensing contract. One approach considers environments where the firm transfers primarily knowledge-based assets and assumes that knowledge is non-excludable. A more recent approach takes the property-right view of the firm and assumes that physical capital is fully excludable. This paper combines both forms of capital assets in a single model. There are subtleties, and added structure is needed to establish what ex ante seems a straightforward testable hypothesis: relatively physical-capital-intensive firms choose outsourcing while relatively knowledge-capital-intensive firms choose FDI.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://economics.ca/cgi/xms?jab=v45n1/CJEv45n1p0001.pdf
File Function: Full text
Download Restriction: Available to subscribers only. Alternative access through JSTOR and Ingenta.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 45 (2012)
Issue (Month): 1 (February)
Pages: 1-15

as
in new window

Handle: RePEc:cje:issued:v:45:y:2012:i:1:p:1-15
Contact details of provider: Postal:
Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4

Web page: http://economics.ca/cje/
Email:


More information through EDIRC

Order Information: Web: http://economics.ca/en/membership.php Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Andrea Fosfuri & Massimo Motta & Thomas Ronde, 1998. "Foreign direct investments and spillovers through workers' mobility," Economics Working Papers 258, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-58, December.
  3. James R. Markusen, 1998. "Contracts, Intellectual Property Rights, and Multinational Investment in Developing Countries," NBER Working Papers 6448, National Bureau of Economic Research, Inc.
  4. repec:fth:michin:282 is not listed on IDEAS
  5. Grossman, Sanford J. & Hart, Oliver D., 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Scholarly Articles 3450060, Harvard University Department of Economics.
  6. Robert C. Feenstra & Gordon H. Hanson, 2004. "Ownership and Control in Outsourcing to China: Estimating the Property-Rights Theory of the Firm," NBER Working Papers 10198, National Bureau of Economic Research, Inc.
  7. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
  8. Pol Antràs, 2005. "Incomplete Contracts and the Product Cycle," American Economic Review, American Economic Association, vol. 95(4), pages 1054-1073, September.
  9. Wilfred J. Ethier & James R. Markusen, 1991. "Multinational Firms, Technology Diffusion and Trade," NBER Working Papers 3825, National Bureau of Economic Research, Inc.
  10. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, December.
  11. Morck, Randall & Yeung, Bernard, 1992. "Internalization : An event study test," Journal of International Economics, Elsevier, vol. 33(1-2), pages 41-56, August.
  12. Pol Antràs, 2003. "Firms, Contracts, and Trade Structure," NBER Working Papers 9740, National Bureau of Economic Research, Inc.
  13. Caves,Richard E., 2007. "Multinational Enterprise and Economic Analysis," Cambridge Books, Cambridge University Press, number 9780521677530.
  14. Morck, R. & Yeung, B., 1991. "Why Investors Value Multinationality," Working Papers 282, Research Seminar in International Economics, University of Michigan.
  15. Ignatius Horstmann & James R. Markusen, 1987. "Licensing versus Direct Investment: A Model of Internalization by the Multinational Enterprise," Canadian Journal of Economics, Canadian Economics Association, vol. 20(3), pages 464-81, August.
  16. Davidson, W H & McFetridge, Donald G, 1984. "International Technology Transactions and the Theory of the Firm," Journal of Industrial Economics, Wiley Blackwell, vol. 32(3), pages 253-64, March.
  17. Glass, Amy Jocelyn & Saggi, Kamal, 1999. "Multinational firms and technology transfer," Policy Research Working Paper Series 2067, The World Bank.
  18. Edwin Mansfield & Anthony Romeo, 1980. "Technology Transfer to Overseas Subsidiaries by U. S.-Based Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 95(4), pages 737-750.
  19. Caves,Richard E., 2007. "Multinational Enterprise and Economic Analysis," Cambridge Books, Cambridge University Press, number 9780521860130.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cje:issued:v:45:y:2012:i:1:p:1-15. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Prof. Werner Antweiler)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.