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The Organization of Knowledge in Multinational Firms

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  • Gumpert, Anna

    (University of Munich)

Abstract

This paper provides the first in-depth study of the organization of knowledge in multinational firms. In the theory, knowledge is a costly input for firms that they can acquire at their headquarters or their production plants. Communication costs impede the access of the plants to headquarter knowledge. The model shows that multinational firms systematically acquire more knowledge at both their foreign and domestic plants than non-multinationals if their foreign plants face higher communication costs with headquarters than their domestic plants. This theoretical prediction helps understand why multinational firms pay higher wages to workers than non-multinational firms, and why their sales decrease across space. The empirical analyses show that higher communication costs indeed decrease multinational firms\' foreign sales. Consistent with model-specific comparative statics, the decrease is stronger in sectors with less predictable production processes. Novel data on corporate transferees allow shedding light on one tool of multinational firms\' organization of knowledge.

Suggested Citation

  • Gumpert, Anna, 2017. "The Organization of Knowledge in Multinational Firms," Rationality and Competition Discussion Paper Series 29, CRC TRR 190 Rationality and Competition.
  • Handle: RePEc:rco:dpaper:29
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    References listed on IDEAS

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    More about this item

    Keywords

    multinational firm; knowledge hierarchy; organization; geography of FDI; multinational wage premium; corporate transferees;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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