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Post-production services and optimal integration strategies for the multinational firm

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  • Seungrae Lee

    () (Kyungpook National University)

Abstract

Abstract This paper examines firms’ decision of integrating production and post-production services to serve foreign markets. The author builds a model in which heterogeneous firms choose different locations to produce output, while employ local or send home managers from headquarters to provide post-production services. The model shows that the equilibrium decision of a firm depends on its own productivity level and the mobility of transferring home managers across borders. Using Korean firm- and affiliate-level data, empirical results show that firms choose production locations based on their productivity levels and transport costs, while firms’ choice of service managers depend on informal trade barriers across borders. These findings are consistent with the theoretical implications.

Suggested Citation

  • Seungrae Lee, 2016. "Post-production services and optimal integration strategies for the multinational firm," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(4), pages 597-628, November.
  • Handle: RePEc:spr:weltar:v:152:y:2016:i:4:d:10.1007_s10290-016-0257-x
    DOI: 10.1007/s10290-016-0257-x
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    References listed on IDEAS

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    1. repec:eee:ejores:v:262:y:2017:i:1:p:163-179 is not listed on IDEAS

    More about this item

    Keywords

    Foreign direct investment; Production location; Post-production services;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration

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