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Power in the multinational corporation in industry equilibrium

  • Dalia Marin
  • Thierry Verdier

    ()

Recent theories of the multinational corporation introduce the property rights model of the firm and examine whether to integrate our outsource firm activities locally or to a foreign country. This paper focus instead on the internal organization of the multinational corporation by examining the power allocation between headquarters and subsidiaries. We provide a framework to analyse the interaction between the decision to serve the local market by exporting or FDI, market acces and the optimal mode of organization of the multinational corporation. We find that subsidiary managers are given most autonomy in their decision how to run the firm at intermediate levels of local competition. We then provide comparative statics for changes in fixed FDI entry costs and trade costs, information technology, the number of local competitors, and in the size of the local market.

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File URL: http://hdl.handle.net/10.1007/s00199-007-0327-3
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Article provided by Springer & Society for the Advancement of Economic Theory (SAET) in its journal Economic Theory.

Volume (Year): 38 (2009)
Issue (Month): 3 (March)
Pages: 437-464

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Handle: RePEc:spr:joecth:v:38:y:2009:i:3:p:437-464
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Web page: http://saet.uiowa.edu/

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Order Information: Web: http://www.springer.com/economics/economic+theory/journal/199/PS2

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  1. Gianmarco I.P. Ottaviano & Alessandro Turrini, 2002. "Distance and FDI when Contracts are Incomplete," Development Working Papers 165, Centro Studi Luca d'Agliano, University of Milano.
  2. Marin, Dalia & Verdier, Thierry, 2002. "Globalization and the 'New Enterprise'," CEPR Discussion Papers 3640, C.E.P.R. Discussion Papers.
  3. Dalia Marin & Thierry Verdier, 2008. "Power Inside The Firm and The Market: A General Equilibrium Approach," Journal of the European Economic Association, MIT Press, vol. 6(4), pages 752-788, 06.
  4. Thierry Verdier & Dalia Marin, 2008. "Competing in Organizations: Firm heterogeneity and International Trade," Post-Print halshs-00754768, HAL.
  5. Esteban Rossi-Hansberg & Pol Antras & Luis Garicano, 2005. "Offshoring in a Knowledge Economy," 2005 Meeting Papers 196, Society for Economic Dynamics.
  6. repec:ner:ucllon:http://discovery.ucl.ac.uk/17678/ is not listed on IDEAS
  7. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-97, December.
  8. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  9. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Scholarly Articles 4554125, Harvard University Department of Economics.
  10. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
  11. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," Development Working Papers 201, Centro Studi Luca d'Agliano, University of Milano.
  12. Marin, Dalia, 2006. "A New International Division of Labour in Europe: Outsourcing and Offshoring to Eastern Europe," CEPR Discussion Papers 5447, C.E.P.R. Discussion Papers.
  13. Diego Puga & Daniel Trefler, 2005. "Wake Up and Smell the Ginseng: The Rise of Incremental Innovation in Low-Wage Countries," NBER Working Papers 11571, National Bureau of Economic Research, Inc.
  14. Oliver Hart & John Moore, 1988. "Property Rights and the Nature of the Firm," Working papers 495, Massachusetts Institute of Technology (MIT), Department of Economics.
  15. Marin, Dalia & Verdier, Thierry, 2008. "Corporate Hierarchies and the Size of Nations: Theory and Evidence," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 227, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  16. Pol Antras & Elhanan Helpman, 2004. "Global Sourcing," Journal of Political Economy, University of Chicago Press, vol. 112(3), pages 552-580, June.
  17. repec:hrv:faseco:4784029 is not listed on IDEAS
  18. repec:hrv:faseco:4784031 is not listed on IDEAS
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