Organization of multinational activities and ownership structure

Abstract

We develop a model in which multinational investors decide about the modes of organization, the locations of production, and the markets to be served. Foreign investments are driven by market-seeking and cost-reducing motives. We further assume that investors face costs of control that vary among sectors and increase in distance. The results show that (i) production intensive sectors are more likely to operate a foreign business independent of the investment motive, (ii) that distance may have a non-monotonous effect on the likelihood of horizontal investments, and (iii) that globalization, if understood as reducing distance, leads to more integration.

Intellectual property rights, product complexity and the organization of multinational firms

“…We include other explanatory variables that might influence the sourcing decision, such as the number of potential suppliers, and capture it by the size of the market as measured by GDP (McLaren 2000;Grossman and Helpman 2002). We also include the distance between the location of the French firm and the destination countries to control for the overall monitoring and trade costs (Mugele and Schnitzer 2008;Ottaviano and Turrini 2007). Table A3 of the appendix 10 Matching the Nunn indexes used in Ma et al (2010) with the French data, we find a positive and significant correlation between our product complexity measure and the index of contract intensity.…”