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Do Multinationals Transplant their Business Model?

Author

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  • Marin, Dalia
  • Rousová, Linda
  • Verdier, Thierry

Abstract

What determines whether or not multinational firms transplant their mode of organisation to other countries? We embed the theory of knowledge hierarchies in an industry equilibrium model of monopolistic competition to examine how the economic environment may affect the decision of a multinational firm about transplanting its business organisation to other countries. We test the theory with original and matched parent and affiliate data on the internal organisation of 660 Austrian and German multinational firms and 2200 of their affiliate firms in Eastern Europe. We find that three factors stand out in promoting the multinational firm’s decision to transplant the business model to the affiliate firm in the host country: a competitive host market, the corporate culture of the multinational firm, and when an innovative technology is transferred to the host country. These factors increase the respective probabilities of organisational transfer by 18.5 percentage points, 37, and 31 percentage points.

Suggested Citation

  • Marin, Dalia & Rousová, Linda & Verdier, Thierry, 2013. "Do Multinationals Transplant their Business Model?," CEPR Discussion Papers 9500, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9500
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    References listed on IDEAS

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    1. 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, June.
    2. Marin, Dalia & Verdier, Thierry, 2012. "Globalization and the empowerment of talent," Journal of International Economics, Elsevier, vol. 86(2), pages 209-223.
    3. Raymond Fisman & Edward Miguel, 2007. "Corruption, Norms, and Legal Enforcement: Evidence from Diplomatic Parking Tickets," Journal of Political Economy, University of Chicago Press, vol. 115(6), pages 1020-1048, December.
    4. Pol Antràs & Luis Garicano & Esteban Rossi-Hansberg, 2006. "Offshoring in a Knowledge Economy," The Quarterly Journal of Economics, Oxford University Press, vol. 121(1), pages 31-77.
    5. Marin, Dalia, 2012. "The Theory of the Firm goes Global," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 370, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    6. Pol Antras & Elhanan Helpman, 2004. "Global Sourcing," Journal of Political Economy, University of Chicago Press, vol. 112(3), pages 552-580, June.
    7. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
    8. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-FranÁois Thisse, 2002. "Agglomeration and Trade Revisited," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 409-436, May.
    9. Alessandra Fogli & Raquel Fernandez, 2009. "Culture: An Empirical Investigation of Beliefs, Work, and Fertility," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 146-177, January.
    10. Raghuram G. Rajan & Julie Wulf, 2006. "The Flattening Firm: Evidence from Panel Data on the Changing Nature of Corporate Hierarchies," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 759-773, November.
    11. Nicholas Bloom & Raffaella Sadun & John Van Reenen, 2010. "Does Product Market Competition Lead Firms to Decentralize?," American Economic Review, American Economic Association, vol. 100(2), pages 434-438, May.
    12. Lorenzo Caliendo & Ferdinando Monte & Esteban Rossi-Hansberg, 2015. "The Anatomy of French Production Hierarchies," Journal of Political Economy, University of Chicago Press, vol. 123(4), pages 809-852.
    13. repec:hrv:faseco:4784029 is not listed on IDEAS
    14. Marin, Dalia & Rousová, Linda, 2011. "The Organization of European Multinationals," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 367, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    15. Maria Guadalupe & Julie Wulf, 2010. "The Flattening Firm and Product Market Competition: The Effect of Trade Liberalization on Corporate Hierarchies," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 105-127, October.
    16. Nicholas Bloom & Raffaella Sadun & John Van Reenen, 2012. "Americans Do IT Better: US Multinationals and the Productivity Miracle," American Economic Review, American Economic Association, vol. 102(1), pages 167-201, February.
    17. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    18. Guadalupe, Maria & Wulf, Julie, 2009. "The Flattening Firm and Product Market Competition," CEPR Discussion Papers 7253, C.E.P.R. Discussion Papers.
    19. Lorenzo Caliendo & Esteban Rossi-Hansberg, 2012. "The Impact of Trade on Organization and Productivity," The Quarterly Journal of Economics, Oxford University Press, vol. 127(3), pages 1393-1467.
    20. repec:hrv:faseco:4784031 is not listed on IDEAS
    21. Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 874-904, October.
    22. Luis Garicano & Esteban Rossi-Hansberg, 2006. "Organization and Inequality in a Knowledge Economy," The Quarterly Journal of Economics, Oxford University Press, vol. 121(4), pages 1383-1435.
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    Cited by:

    1. OGREAN Claudia, 2015. "Business Models To Meet The Challenges Of The Global Economy. A Literature Review," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 67(6), pages 127-146, December.
    2. repec:ebd:wpaper:157 is not listed on IDEAS

    More about this item

    Keywords

    organisational economics of multinational firms; organisational transfer between countries; the theory of the firm; trade and organisations;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts

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