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The Hardships of Long Distance Relationships: Knowledge Transmission and the Ease of Communication within Multinational Firms

Author

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  • Dany Bahar

    (Center for International Development at Harvard University)

Abstract

Using a unique dataset on worldwide multinational corporations with precise location of headquarters and affiliates, I present evidence suggesting that when firms expand internationally, they tend to locate foreign subsidiaries geographically closer to the headquarters the more knowledge intensive the affiliates’ economic activities are. This tradeoff, however, weakens when controlling for the ease of communication between the headquarters and its foreign subsidiary, such as being in the same time zone. All the evidence points that the intra-firm transmission of knowledge plays an important role in the mechanisms of the proximity-concentration hypothesis.

Suggested Citation

  • Dany Bahar, 2017. "The Hardships of Long Distance Relationships: Knowledge Transmission and the Ease of Communication within Multinational Firms," CID Working Papers 85a, Center for International Development at Harvard University.
    • Handle: RePEc:cid:wpfacu:85a
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    File URL: https://growthlab.cid.harvard.edu/files/growthlab/files/2019-11-cid-fellows-wp-85-revision-ldr-mnc.pdf
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    References listed on IDEAS

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    Cited by:

    1. Bahar, Dany, 2018. "The middle productivity trap: Dynamics of productivity dispersion," Economics Letters, Elsevier, vol. 167(C), pages 60-66.

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    More about this item

    Keywords

    multinational firms; multinational corporations; knowledge; location; proximity concentration hypothesis; FDI;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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