Reconciling the Evidence on the Knowledge-capital Model

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe Knowledge Capital Model (KC-model), described in Markusen (2002), encompasses both market size (horizontal) as well as factor endowment (vertical) explanations to why multinational production occurs. Although the KC-model seems intuitively appealing, the empirical support has, so far, been weak and even confused. In this study, we find strong, robust and consistent support for the KC-model. In contrast to previous studies, our skill measures follow directly from the model. We also use an enlarged dataset, where the data coverage is significantly improved. Our results also give estimated surfaces remarkably similar to theoretical simulations of the KC-model. In addition, the results give important insights into why previous studies have yielded such diverse results.JEL classification: F12, F23

Foreign Direct Investment and Trade: Complements or Substitutes? Empirical Evidence for the European Union

“…Let consider three different econometric specifications for the determinants of FDI, based, respectively, on [19,MM hereafter], [20,BNU hereafter] and [21,KT hereafter]. MM and BNU models represent the new approach to FDI models, that allow for the existence of horizontal and vertical motivations, although, what is more important, these models integrate both horizontal and vertical FDI to come up with a new hybrid model named knowledge-capital.…”

Political Regime and Vertical vs. Horizontal FDI

“…However, if one moves to an imperfect competition setting, market size matters for the choice of productive locations, and the larger is a country's dimension, the more convenient it is to locate production there if this is associated with trade cost savings. For instance, Braconier et al (2005) show that vertical FDI in the "knowledge capital" model targets large host countries if a share of the final output is not re-exported.…”

Vertical foreign direct investment: Evidence from Japanese and U.S. multinational enterprises

“…Prior research, including Carr, Markusen, and Maskus (2001), Braconier, Norbäck, and Urban (2005a), and Davies (2008), shows that multinational activity is positively related to differences in relative skilled-labor abundance across countries, consistent with vertical FDI. In contrast, another set of research such as Brainard (1993Brainard ( , 1997, Maskus (2001, 2002), and Blonigen, Davies, and Head (2003), finds that multinational production is negatively correlated with relative skill differences.…”

“…A set of empirical work attempts to resolve mixed evidence of the vertical part of the knowledge-capital model. Braconier et al (2005a) and Davies (2008) modify the empirical specification of Carr et al and enlarge the country coverage of the MNE data. While these studies provide some evidence for vertical MNEs, their results are sensitive in the sense that relative skill abundance has statistically insignificant effects on FDI activity in some specifications.…”