Multinational Firms: Reconciling Theory and Evidence / James R. Markusen, Keith E. Maskus.

Format:

Book

Author/Creator:

Markusen, James R.

Contributor:

National Bureau of Economic Research.

Maskus, Keith E.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7163.

NBER working paper series no. w7163

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Multinational Firms

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1999.

Summary:

An important component of Robert Lipsey's work has been his research on multinational firms, and his careful documentation of their behavior in terms of production and intra-firm trade. In this paper, we extend recent theory referred to as the knowledge-capital model', which simultaneously generates motives for both horizontal and vertical multinational production. We use this model to derive predictions about foreign affiliates' pattern of production for local markets versus production for exports as functions of country characteristics such as market sizes, size differences, and relative endowment differences. These predictions are then taken to data on affiliate production and trade. Results confirm several hypotheses. The ratio of production for export sales to production for local sale by affiliates of foreign multinationals depends negatively on market size, investment and trade costs in the host country, and positively on the relative skilled-labor abundance of the parent country (skilled-labor scarcity of the host country).

Notes:

Print version record

June 1999.