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Interdependence in Multinational Production Networks

  • Chen, Maggie

Most multinational firms today operate multilateral production networks. Most existing empirical analyses, however, have focused on firms' choice between producing at home and investing overseas. This paper uses detailed French multinational subsidiary data to examine the effect of existing production networks on multinationals' entry decisions. The paper finds strong horizontal and vertical interdependence across multinationals' foreign production locations, but little interdependence between home and foreign production when third-country effects are taken into account. This result constitutes a sharp contrast to the conventional emphasis, and highlights the importance of investigating foreign direct investment in the context of multinational production networks.

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File URL: https://mpra.ub.uni-muenchen.de/28485/2/MPRA_paper_28485.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 28485.

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Date of creation: 2009
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Handle: RePEc:pra:mprapa:28485
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  1. Bruce A. Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," NBER Working Papers 11299, National Bureau of Economic Research, Inc.
  2. Motta, Massimo & Norman, George, 1996. "Does Economic Integration Cause Foreign Direct Investment?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 757-83, November.
  3. Karolina Ekholm & Rikard Forslid & James Markusen, 2003. "Export-Platform Foreign Direct Investment," NBER Working Papers 9517, National Bureau of Economic Research, Inc.
  4. Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
  5. Laura Alfaro & Andrew Charlton, 2007. "Intra-industry foreign direct investment," LSE Research Online Documents on Economics 19690, London School of Economics and Political Science, LSE Library.
  6. Baltagi, Badi H. & Egger, Peter & Pfaffermayr, Michael, 2007. "Estimating models of complex FDI: Are there third-country effects?," Journal of Econometrics, Elsevier, vol. 140(1), pages 260-281, September.
  7. Diego Puga & Anthony J. Venables, 1995. "Preferential Trading Arrangements and Industrial Location," CEP Discussion Papers dp0267, Centre for Economic Performance, LSE.
  8. Gordon H. Hanson & Raymond J. Mataloni & Matthew J. Slaughter, 2003. "Vertical Production Networks in Multinational Firms," NBER Working Papers 9723, National Bureau of Economic Research, Inc.
  9. Venables, Anthony J, 1996. "Equilibrium Locations of Vertically Linked Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 341-59, May.
  10. David L. Carr & James R. Markusen & Keith E. Maskus, 1998. "Estimating the Knowledge-Capital Model of the Multinational Enterprise," NBER Working Papers 6773, National Bureau of Economic Research, Inc.
  11. Stephen Ross Yeaple, 2003. "The Role of Skill Endowments in the Structure of U.S. Outward Foreign Direct Investment," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 726-734, August.
  12. Blonigen, Bruce A. & Davies, Ronald B. & Waddell, Glen R. & Naughton, Helen T., 2007. "FDI in space: Spatial autoregressive relationships in foreign direct investment," European Economic Review, Elsevier, vol. 51(5), pages 1303-1325, July.
  13. Krugman, Paul & Venables, Anthony J, 1993. "Integration, Specialization and Adjustment," CEPR Discussion Papers 886, C.E.P.R. Discussion Papers.
  14. Head, Keith & Mayer, Thierry, 2002. "Market Potential and the Location of Japanese Investment in the European Union," CEPR Discussion Papers 3455, C.E.P.R. Discussion Papers.
  15. James R. Markusen & Anthony J. Venables, 1996. "The Theory of Endowment, Intra-Industry, and Multinational Trade," NBER Working Papers 5529, National Bureau of Economic Research, Inc.
  16. Maggie X. Chen, 2008. "Regional Economic Integration and Geographic Concentration of Multinational Firms," Working Papers 2009-07, The George Washington University, Institute for International Economic Policy.
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