Brands in Motion: How Frictions Shape Multinational Production

Head, Keith; Mayer, Thierry

doi:10.2139/ssrn.2983679

Cited by 45 publications

(64 citation statements)

References 16 publications

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“…Turning to sourcing related costs (bottom panel), we find that for our preferred specification (column IV), production at a domestic (δ dom ) plant decreases costs. The cost elasticity of distance, δ mdist , is comparable to the estimate of Head and Mayer (2015)-0.036-and within the range of estimates summarized by Head and Mayer (2013). It is slightly lower than the estimate from the reduced form price regression in Table 7, which could be interpreted as a cost elasticity under the assumption of perfect competition where firms always source from the nearest location.…”

Section: Supply Estimatessupporting

confidence: 56%

What Drives Home Market Advantage?

Coşar¹,

Grieco²,

Li³

et al. 2015

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In the automobile industry, as in many tradable goods markets, firms usually earn their highest market share within their domestic market. The goal of this paper is to disentangle the supplyand demand-driven sources of the home market advantage. While trade costs, foreign production costs, and taste heterogeneity all matter for market outcomes, we find that a preference for home brands is the single most important driver of home market advantage -even after controlling for brand histories and dealer networks. Furthermore, we also find that consumers favor domestically producing brands regardless of the historical brand origin.A. Kerem Cosar

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Section: Supply Estimatessupporting

confidence: 56%

What Drives Home Market Advantage?

Coşar¹,

Grieco²,

Li³

et al. 2015

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“…20 We define ownership as when at least 50% of an affiliate is owned by another firm. 21 Our results are robust to omitting this outlier. 22 These firms are worth recognizing as for them, the depreciation of the Sterling measure we use was zero.…”

Section: Hypothesismentioning

confidence: 63%

“…Note that the mean number of affiliates is 176 affiliates, a number driven in part by a firm with 3,393 affiliates worldwide. 21 The median firm in our sample has 81 affiliates. Note that 58 of the firms are entirely UK-based.…”

Section: Firm Controlsmentioning

confidence: 99%

The heterogeneous impact of Brexit: Early indications from the FTSE

Davies

Studnicka

2018

European Economic Review

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The UK's decision to leave the EU is surrounded by several studies simulating its potential effects. Alternatively, we examine expectations embodied in stock returns using a two-part estimation process. While most firms' prices fell, there was considerable heterogeneity in their relative changes. We show that this heterogeneity can be explained by the firm's global value chain, with heavily European firms doing relatively worse. For firms with few imported intermediates, this was partially offset by a greater Sterling depreciation. These changes were primarily in the first two days and highly persistent. Understanding these movements gives a better understanding Brexit's potential effects.1 Norway has a free trade agreement with the EU but is not a member of the EU's customs union, so it faces the non-tariff barriers that apply to non-EU countries.2 Other studies in this vein, which cover various simulation exercises, include Head and Mayer (2015), PWC (2016), Fraser of Allander (2016) (who focus on Scotland), HM Treasury (2016),and OECD (2016). All of these find negative effects of various magnitudes whereas Minford, et al. (2016) finds the potential for positive impacts on the UK. It should be noted that Sampson, et al. (2016) argue that Minford, et al.'s optimism is based on implausible assumptions on trade barrier changes and import elasticities.3 Head and Mayer (2015) describe three possible disadvantages of Brexit for FDI. First, an increase in trade barriers makes production in the UK less attractive because it becomes more costly to ship to the rest of Europe. Second, supplying inputs and staff from brands headquarters becomes more difficult (higher co-ordination costs). Third, UK products become less attractive to EU consumer after Brexit.4 Strictly speaking, this is a return that is 14.4% worse than expectations; since in the long run a firm's return should equal the market, results in our comparison. See below for a detailed discussion of how to 11 Timmer, et al. (2014b) provide a recent overview of this literature. 12 Davies, et al. (forthcoming) find that tariff pass-through within a multinational is roughly half that of an arm's length transaction.13 See London Stock Exchange (2010) for details.

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“…(See, Houde, 2012: 2173 for further discussion). 24 We noted earlier that the estimate of q E jt in model 6-2 did not allow us to reject the hypothesis that Korea is a small country, facing a competitive overseas market. Nevertheless, Table 8 reports the results of a robustness check using the alternative assumption that Korea is a large country.…”

Section: Accepted Manuscriptmentioning

confidence: 76%

“…We do this through the construction of a platform variable for each counterfactual merger. To identify which models would have likely constituted a shared platform between Daewoo (or Samsung) and Kia, we use the Mahalanobis 24 To identify which of the hypotheses fits to our application, we probably need to know what choice set each consumer faces. Such analysis requires individual-level data unavailable to us for the study.…”

Section: Alternative Merger Scenariosmentioning

confidence: 99%