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The global agglomeration of multinational firms

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  • Alfaro, Laura
  • Chen, Maggie Xiaoyang

Abstract

The explosion of multinational activities in recent decades is rapidly transforming the global landscape of industrial production. But are the emerging clusters of multinational production the rule or the exception? What drives the offshore agglomeration of multinational firms in comparison to the agglomeration of domestic firms? Using a unique worldwide plant-level dataset that reports detailed location, ownership, and operation information for plants in over 100 countries, we construct a spatially continuous index of agglomeration and analyze the different patterns underlying the global economic geography of multinational and non-multinational firms. We present new stylized facts that suggest that the offshore clusters of multinationals are not a simple reflection of domestic industrial clusters. Agglomeration economies including technology diffusion and capital-good market externality play a more important role in the offshore agglomeration of multinationals than the agglomeration of domestic firms. These findings remain robust when we explore the process of agglomeration.

Suggested Citation

  • Alfaro, Laura & Chen, Maggie Xiaoyang, 2014. "The global agglomeration of multinational firms," Journal of International Economics, Elsevier, vol. 94(2), pages 263-276.
  • Handle: RePEc:eee:inecon:v:94:y:2014:i:2:p:263-276
    DOI: 10.1016/j.jinteco.2014.09.001
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    Cited by:

    1. Riccardo Crescenzi & Kerwin Datu & Simona Iammarino, 2016. "European Cities and Foreign Investment Networks," Papers in Evolutionary Economic Geography (PEEG) 1616, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Jul 2016.
    2. Laura Alfaro & Maggie X. Chen, 2016. "Location Fundamentals, Agglomeration Economies, and the Geography of Multinational Firms," Working Papers 2016-18, The George Washington University, Institute for International Economic Policy.
    3. Serafinelli, Michel, 2013. "Good Firms, Worker Flows and Productivity," MPRA Paper 47508, University Library of Munich, Germany.
    4. Riccardo Crescenzi & Carlo Pietrobelli & Roberta Rabellotti, 2016. "Regional strategic assets and the location strategies of emerging countries’ multinationals in Europe," European Planning Studies, Taylor & Francis Journals, vol. 24(4), pages 645-667, April.
    5. repec:pal:jintbs:v:49:y:2018:i:8:d:10.1057_s41267-017-0088-6 is not listed on IDEAS
    6. Steven Brakman & Harry Garretsen & Charles van Marrewijk, 2015. "The Location of Cross-Border Mergers & Acquisitions in the USA," CESifo Working Paper Series 5331, CESifo Group Munich.
    7. William R. Kerr & Scott Duke Kominers, 2015. "Agglomerative Forces and Cluster Shapes," The Review of Economics and Statistics, MIT Press, vol. 97(4), pages 877-899, October.
    8. Marcon, Eric & Puech, Florence, 2017. "A typology of distance-based measures of spatial concentration," Regional Science and Urban Economics, Elsevier, vol. 62(C), pages 56-67.
    9. YAMASHITA Nobuaki & YAMAUCHI Isamu, 2019. "Effects of Offshore Production and R&D on Domestic Innovation Activities," Discussion papers 19068, Research Institute of Economy, Trade and Industry (RIETI).
    10. repec:eee:iburev:v:28:y:2019:i:2:p:209-221 is not listed on IDEAS
    11. Nicola Cortinovis & Riccardo Crescenzi & Frank van Oort, 2018. "Multinational enterprises, industrial relatedness and employment in European regions," Papers in Evolutionary Economic Geography (PEEG) 1802, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Jan 2018.
    12. repec:eee:respol:v:48:y:2019:i:9:23 is not listed on IDEAS
    13. Sun, Churen & Yu, Zhihao & Zhang, Tao, 2012. "Agglomeration and Trade with Heterogeneous Firms," MPRA Paper 49001, University Library of Munich, Germany, revised 17 Aug 2013.
    14. Machikita, Tomohiro & Ueki, Yasushi, 2012. "Impact of Production Linkages on Industrial Upgrading in ASEAN, the People’s Republic of China, and India: Organizational Evidence of a Global Supply Chain," ADBI Working Papers 399, Asian Development Bank Institute.
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    17. Carluccio, Juan & Fally, Thibault, 2013. "Foreign entry and spillovers with technological incompatibilities in the supply chain," Journal of International Economics, Elsevier, vol. 90(1), pages 123-135.
    18. Douglas Hanley & Chengying Luo & Mingqin Wu, 2019. "Geographic Clustering of Firms in China," 2019 Meeting Papers 1522, Society for Economic Dynamics.
    19. repec:elg:eechap:17028_12 is not listed on IDEAS
    20. repec:gam:jsusta:v:10:y:2018:i:11:p:4179-:d:182518 is not listed on IDEAS
    21. Laura Alfaro & Maggie Xiaoyang Chen, 2018. "Transportation cost and the geography of foreign investment," Chapters, in: Bruce A. Blonigen & Wesley W. Wilson (ed.), Handbook of International Trade and Transportation, chapter 12, pages 369-406, Edward Elgar Publishing.

    More about this item

    Keywords

    Multinational firm; Agglomeration; Agglomeration economies;

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • D2 - Microeconomics - - Production and Organizations
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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