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Internationalized Production in Developed and Developing Countries and in Industry Sectors


  • Robert E. Lipsey


Internationalized production, that is, production in a country controlled by firms based in another country, grew from about 4.5% of world output in 1970 to over 7% in 1995. The importance of internationalized output fell substantially in developing countries until around 1990 but has been been increasing since then, especially in the 'transition' countries, where it has grown from less than $100 million in 1977 to over $25 billion in 1994. The petroleum sector was the one with the highest share of internationalized production in the 1970s, but that share has declined sharply, especially in the developing countries, where important operations were nationalized. Manufacturing is now the sector in which internationalized production plays the largest role, the internationalized share rising from under 12% to more than 16% in 1990. That share was probably considerably larger in 1995, given the increase in the absolute value of internationalized output by more than a third from 1993 to 1995. Outside of petroleum and manufacturing, internationalized production was of little importance. For the world as a whole, the internationalized share was about 3« percent in 1990. However, if the trend in U.S.-owned production is an indication, the role of internationalized production in this sector may be changing; the share in total production of U.S. foreign affiliates in developing countries of a broad service sector including trade and finance rose from 6% in 1977 to 18% in 1995.

Suggested Citation

  • Robert E. Lipsey, 1998. "Internationalized Production in Developed and Developing Countries and in Industry Sectors," NBER Working Papers 6405, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:6405
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    References listed on IDEAS

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    Cited by:

    1. Hongshik Lee, 2010. "Decision To Invest Abroad: The Case Of South Korean Multinationals," Pacific Economic Review, Wiley Blackwell, vol. 15(2), pages 281-302, May.
    2. Michael B. Devereux & Charles Engel, 2001. "The Optimal Choice of Exchange Rate Regime: Price-Setting Rules and Internationalized Production," NBER Chapters,in: Topics in Empirical International Economics: A Festschrift in Honor of Robert E. Lipsey, pages 163-194 National Bureau of Economic Research, Inc.
    3. Russ, Katheryn Niles, 2007. "The endogeneity of the exchange rate as a determinant of FDI: A model of entry and multinational firms," Journal of International Economics, Elsevier, vol. 71(2), pages 344-372, April.
    4. De Negri, Fernanda & Hiratuka, Célio, 2004. "The influence of capital origin on Brazilian foreign trade patterns," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    5. Braunstein, Elissa, 2000. "Engendering Foreign Direct Investment: Family Structure, Labor Markets and International Capital Mobility," World Development, Elsevier, vol. 28(7), pages 1157-1172, July.
    6. Katheryn Russ, 2012. "Exchange rate volatility and first-time entry by multinational firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(2), pages 269-295, June.
    7. Russ, Katheryn, 2004. "The Endogeneity of the Exchange Rate as a Determinant of FDI: A Model of Money, Entry, and Multinational Firms," Santa Cruz Department of Economics, Working Paper Series qt9xr4f238, Department of Economics, UC Santa Cruz.

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