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The Influence of Wages and Industrial Relations Environments on the Production Location Decisions of U.S. Multinational Corporations

Author

Listed:
  • Mario F. Bognanno
  • Michael P. Keane
  • Donghoon Yang

Abstract

Using the Benchmark and Annual Surveys of U.S. Direct Investment Abroad collected by the Bureau of Economic Analysis, the authors examine the operations of U.S. multinational corporations (MNCs) in seven manufacturing industries and twenty-two countries over the years 1982–91. They analyze how tariffs, wages, and industrial relations environments influenced U.S. MNCs' decisions about where to locate assets and employment. The results imply that wages and the industrial relations environment were statistically significant determinants of the extent to which MNCs located operations in a particular host country. However, while these factors were important, their impact was much smaller than that of host country market size, which was by far the main determinant of MNC location decisions. Furthermore, the authors find no evidence that tariff reductions increased the share of U.S. MNC activities located abroad. Thus, concerns that tariff reductions may lead to loss of “American jobs†appear to be exaggerated.

Suggested Citation

  • Mario F. Bognanno & Michael P. Keane & Donghoon Yang, 2005. "The Influence of Wages and Industrial Relations Environments on the Production Location Decisions of U.S. Multinational Corporations," ILR Review, Cornell University, ILR School, vol. 58(2), pages 171-200, January.
    • Handle: RePEc:sae:ilrrev:v:58:y:2005:i:2:p:171-200
    DOI: 10.1177/001979390505800201
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    References listed on IDEAS

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    Cited by:

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    6. Shao, Yanmin & Shang, Yan, 2016. "Decisions of OFDI Engagement and Location for Heterogeneous Multinational firms: Evidence from Chinese firms," Technological Forecasting and Social Change, Elsevier, vol. 112(C), pages 178-187.
    7. Achim Hecker, 2009. "Determinanten von Offshore-Outsourcing-Aktivitäten im deutschen Mittelstand," Schmalenbach Journal of Business Research, Springer, vol. 61(6), pages 628-653, September.
    8. Nina Pološki Vokić & Maja Klindžić, 2022. "The country-of-origin and country-of-operations effect on organised labour in multinational companies – exploring the role of labour relations models," Transfer: European Review of Labour and Research, , vol. 28(4), pages 409-422, November.
    9. Jirjahn, Uwe, 2021. "Membership in Employers' Associations and Collective Bargaining Coverage in Germany," GLO Discussion Paper Series 954, Global Labor Organization (GLO).
    10. Uwe Jirjahn, 2017. "Globalisierung und betriebliche Mitbestimmung," Research Papers in Economics 2017-05, University of Trier, Department of Economics.
    11. Marlies Kluike & Kerstin Pull, 2013. "Similar, but still different: how US multinational companies in Germany and Switzerland use host-country training and skill practices," Industrial Relations Journal, Wiley Blackwell, vol. 44(5-6), pages 495-513, November.
    12. O'Farrell, Rory, 2012. "The effect of international firm mobility on wages and unemployment," Labour Economics, Elsevier, vol. 19(6), pages 931-943.
    13. João Ricardo Faria, 2016. "Location Clusters, FDI and Local Entrepreneurs: Consistent Public Policy," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 7(4), pages 858-868, December.
    14. Uwe Jirjahn, 2023. "Membership in employers’ associations and collective bargaining coverage in Germany," Economic and Industrial Democracy, Department of Economic History, Uppsala University, Sweden, vol. 44(3), pages 798-826, August.
    15. Krzywdzinski, Martin, 2014. "Do investors avoid strong trade unions and labour regulation? Social dumping in the European automotive and chemical industries," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 28(6), pages 926-945.
    16. Burçak Polat, 2017. "Rate of return on foreign investment income and employment labour protection: A panel analysis of thirty OECD countries," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1273588-127, January.
    17. Duanmu, Jing-Lin, 2014. "A race to lower standards? Labor standards and location choice of outward FDI from the BRIC countries," International Business Review, Elsevier, vol. 23(3), pages 620-634.
    18. Fodouop Kouam Arthur William, 2024. "Navigating the Relocation Trend: The Rising Shift of Multinational Corporations from China to Other Countries," International Journal of Science and Business, IJSAB International, vol. 34(1), pages 62-75.

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