scholarly journals Global Production with Export Platforms*

2016 ◽  
Vol 132 (1) ◽  
pp. 157-209 ◽  
Author(s):  
Felix Tintelnot
Keyword(s):  
General Equilibrium ◽  
Host Country ◽  
Foreign Investment ◽  
Multinational Firms ◽  
Multinational Enterprise ◽  
Fixed Costs ◽  
Firm Level ◽  
Level Data ◽  
Multinational Production ◽  
Foreign Affiliates

Abstract Most international commerce is carried out by multinational firms, which use their foreign affiliates both to serve the market of the host country and to export to other markets outside the host country. In this article, I examine the determinants of multinational firms’ location and production decisions and the welfare implications of multinational production. The few existing quantitative general equilibrium models that incorporate multinational firms achieve tractability by assuming away export platforms—that is, they do not allow foreign affiliates of multinationals to export—or by ignoring fixed costs associated with foreign investment. I develop a quantifiable multicountry general equilibrium model, which tractably handles multinational firms that engage in export platform sales and that face fixed costs of foreign investment. I first estimate the model using German firm-level data to uncover the size and nature of costs of multinational enterprise and show that the fixed costs of foreign investment are large. Second, I calibrate the model to data on trade and multinational production for twelve European and North American countries. Counterfactual analysis reveals that multinationals play an important role in transmitting technological improvements to foreign countries and that the pending Canada-EU trade and investment agreement could divert a sizable fraction of the production of EU multinationals from the U.S. to Canada.

scholarly journals Information related service trade within firms: evidence from firm-level data in Germany

2021 ◽  
Author(s):  
Kurt A. Hafner ◽  
Jörn Kleinert
Keyword(s):  
Multinational Firms ◽  
Economies Of Scope ◽  
It Services ◽  
Firm Level ◽  
It Service ◽  
Level Data ◽  
Related Service ◽  
Foreign Affiliates ◽  
Knowledge Intensive ◽  
Parent Companies

AbstractMulti-unit firms have productivity advantages over competitors because of their use of a non-rival asset—firm-specific knowledge—in several units. Using knowledge-intensive services leads to economies of scope in production by multi-unit firms. Such headquarter are usually supplied by parent companies and serve to link different firm units. Headquarter services are difficult to quantify in statistics or surveys, except when they cross-borders and the exchange of services between MNEs and their offshore subsidiaries becomes apparent. This study therefore focuses on IT service imports to explain productivity differences among foreign affiliates of multinational firms in Germany. The authors base the analysis on the population of foreign multinational firms active in Germany and analyze what effect the import of IT services has on their productivity. They find that IT headquarter service flows have significant impacts on foreign affiliates’ productivity in general and US affiliates in particular. As the average IT-service flows (per firm and partner) from parent countries are significantly higher for US affiliates than non-US affiliates, they conclude that the import of IT services from the parent-company is a source of the productivity advantages of US affiliates in Germany.

scholarly journals US Environmental Regulation and FDI: Evidence from a Panel of US-Based Multinational Firms

2010 ◽  
Vol 2 (3) ◽  
pp. 158-189 ◽  
Author(s):  
Rema Hanna
Keyword(s):  
Foreign Investment ◽  
Multinational Firms ◽  
Clean Air Act ◽  
Econometric Models ◽  
Substantial Variation ◽  
Firm Level ◽  
Level Data ◽  
Regulated Firms ◽  
Firm Level Data ◽  
Clean Air

This paper measures the response of US-based multinationals to the Clean Air Act Amendments (CAAA). Using a panel of firm-level data over the period 1966–1999, I estimate the effect of regulation on a multinational's foreign production decisions. The CAAA induced substantial variation in the degree of regulation faced by firms, allowing for the estimation of econometric models that control for firm-specific characteristics and industrial trends. I find that the CAAA caused regulated multinational firms to increase their foreign assets by 5.3 percent and their foreign output by 9 percent. Heavily regulated firms did not disproportionately increase foreign investment in developing countries. (JEL F23, K32, L51, Q52, Q53, Q58)

scholarly journals Pollution Havens and Foreign Direct Investment: Dirty Secret or Popular Myth?

2003 ◽  
Vol 3 (2) ◽  
Author(s):  
Beata Smarzynska Javorcik ◽  
Shang-Jin Wei
Keyword(s):  
Soviet Union ◽  
Host Country ◽  
Former Soviet Union ◽  
Multinational Firms ◽  
Environmental Standards ◽  
Pollution Haven Hypothesis ◽  
Firm Level ◽  
Pollution Haven ◽  
Level Data ◽  
Industry Level Data

Abstract The “pollution haven” hypothesis refers to the possibility that multinational firms, particularly those engaged in highly polluting activities, relocate to countries with weaker environmental standards. Despite the plausibility and popularity of this hypothesis, the existing literature has found only limited evidence to support it. To enhance our ability to detect the possible “dirty secret,” this study makes improvements in four areas. First, we focus on investment flows from multiple countries to 25 economies in Eastern Europe and the former Soviet Union. Transition countries are a suitable region for studying this question, as they offer a large variation in terms of environmental standards. Second, we take into explicit account the effect of host country corruption. Third, we include information on both the polluting-intensity of the potential investor and the environmental stringency in the potential host country, which allows us to test whether dirty industries are relatively more attracted to locations with weak standards. And fourth, we rely on firm-level rather than industry-level data. Despite these improvements, we find no support for the “pollution haven” hypothesis. If anything, firms in less polluting industries are more likely to invest in the region. We find no systematic evidence that FDI from “dirtier” industries is more likely to go to countries with weak environmental regulations.

The Gravity of Knowledge

2013 ◽  
Vol 103 (4) ◽  
pp. 1414-1444 ◽  
Author(s):  
Wolfgang Keller ◽  
Stephen Ross Yeaple
Keyword(s):  
Knowledge Transfer ◽  
Multinational Firms ◽  
Multinational Firm ◽  
Firm Level ◽  
Direct Communication ◽  
Multinational Activity ◽  
Level Data ◽  
Firm Level Data ◽  
Foreign Affiliates ◽  
Firm Model

We analyze the international operations of multinational firms to measure the spatial barriers to transferring knowledge. We model firms that can transfer bits of knowledge to their foreign affiliates in either embodied (traded intermediates) or disembodied form (direct communication). The model shows how knowledge transfer costs can be inferred from multinationals' operations. We use firm-level data on the trade and sales of US multinationals to confirm the model's predictions. Disembodied knowledge transfer costs not only make the standard multinational firm model consistent with the fact that affiliate sales fall in distance but quantitatively accounts for much of the gravity in multinational activity. (JEL F12, F14, F23, L25, O33)

Making the Invisible Visible: Investment Promotion and Multinational Production in Latin America and the Caribbean

2021 ◽  
Author(s):  
Christian Volpe Martincus ◽  
Ignacio Marra de Artiñano ◽  
Monika Sztajerowska ◽  
Jerónimo Carballo
Keyword(s):  
Multinational Firms ◽  
Cost Effective ◽  
Firm Level ◽  
Information Barriers ◽  
Investment Promotion ◽  
Promotion Policies ◽  
Level Data ◽  
Multinational Production ◽  
The Impact ◽  
The Invisible

Firms seeking to invest abroad must still confront important information barriers. As a consequence, a given country may provide suitable conditions for investment but remain invisible to multinational firms. Nearly all countries in the world have established investment promotion agencies (IPAs) to address these information barriers and put themselves on investors maps. Although IPAs are ubiquitous, the existing literature on the impacts of their activities is limited and only provides a view from the top, thus leaving governments without crucial inputs for designing and guiding their policy actions. Making the Invisible Visible fills in these knowledge gaps by zooming in on the effects of investment promotion policies and the mechanisms and channels thereof. To do so, it draws on the results of a highly detailed institutional survey of more than 50 IPAs and unique firm-level data on both the worldwide location of multinational firms foreign affiliates and IPA assistance for several LAC countries. Based on the results of impact evaluations using this novel micro data, the report presents robust new evidence on whether and how investment promotion works, what works in investment promotion, and when investment promotion works. In particular, it concludes that: (i) investment promotion has been (cost-)effective in attracting multinational firms and increasing LAC countries participation in multinational production; (ii) how IPAs are organized, what they do, and how they do it all influence these effects; (iii) the impact of IPA assistance has been greater when it consisted of specialized information services and was given to firms headquartered in countries and operating in sectors in which information barriers are more prominent. These findings can help countries in the region make better, more informed policy and operational decisions to take advantage of the opportunities that the current global context could create. They may thereby create a solid basis for long-term growth and sustainable development.

scholarly journals Growth Through Inter-sectoral Knowledge Linkages

2018 ◽  
Vol 86 (5) ◽  
pp. 1827-1866 ◽  
Author(s):  
Jie Cai ◽  
Nan Li
Keyword(s):  
General Equilibrium ◽  
Technological Change ◽  
Equilibrium Model ◽  
New Products ◽  
General Equilibrium Model ◽  
Fixed Costs ◽  
Aggregate Model ◽  
Firm Level ◽  
Firm Innovation ◽  
Aggregate Growth

Abstract The majority of innovations are developed by multi-sector firms. The knowledge needed to invent new products is more easily adapted from some sectors than from others. We study this network of knowledge linkages between sectors and its impact on firm innovation and aggregate growth. We first document a set of sectoral-level and firm-level observations on knowledge applicability and firms’ multi-sector patenting behaviour. We then develop a general equilibrium model of firm innovation in which inter-sectoral knowledge linkages determine the set of sectors a firm chooses to innovate in and how much R&D to invest in each sector. It captures how firms evolve in the technology space, accounts for cross-sector differences in R&D intensity, and describes an aggregate model of technological change. The model matches new observations as demonstrated by simulation. It also yields new insights regarding the mechanism through which sectoral fixed costs of R&D affect growth.

Multinational Enterprise, Innovation, and Development: Theoretical Perspectives

2018 ◽  
Author(s):  
Patrick J. W. Egan
Keyword(s):  
Political Economy ◽  
International Development ◽  
Value Chain ◽  
Multinational Firms ◽  
Multinational Enterprise ◽  
Firm Level ◽  
Business Studies ◽  
Theoretical Perspectives ◽  
Prior Literature ◽  
Enterprise Innovation

This chapter provides the theoretic background and working hypotheses for the empirical tests that follow in subsequent chapters. The book is informed by substantial literature in several academic subfields, including but not limited to international political economy, international business studies, development economics, and global value chain research. This chapter builds a cumulative theoretic framework for interpreting multinational innovation and comparative institutionalist perspectives. Prior literature and debate inform the hypotheses presented in this chapter, which involve both country and firm level attributes and resulting investment patterns. The chapter considers ideas from international development studies regarding the role of multinational firms in processes of country growth and technological upgrading, theories of the firm and contemporary pressures for polycentric innovation models, and institutionalist perspectives from political science and political economy. This chapter also provides working definitions for key concepts and how institutions might be analytically separated from host country policies. The chapter emphasizes the theoretic support for the causal mechanisms supposed in the various hypotheses.

The Thai Currency Crisis: Financing Constraints, High Fixed Costs, and Corporate Governance

2005 ◽  
Vol 4 (2) ◽  
pp. 60-87 ◽  
Author(s):  
Robert Dekle ◽  
Cathy Karnchanasai ◽  
Pongsak Hoontrakul
Keyword(s):  
Scale Economies ◽  
Asian Financial Crisis ◽  
Financing Constraints ◽  
Fixed Costs ◽  
High Scale ◽  
Firm Level ◽  
Unit Costs ◽  
Level Data ◽  
Financing Costs

We examine the role of financing constraints in depressing output during the Asian financial crisis, using Thai firm-level data. From an output decline of 3.7 percent in our sample in 1998, we find that tightening financing constraints contributed to lowering output by 1.7 percent. We also find evidence of high scale economies or high fixed costs in Thai industries. With high fixed costs, small changes in unit costs or financing costs can lead to large changes in output. We interpret the high fixed costs as evidence of overinvestment prior to the crisis.

scholarly journals Soy dairy performance metrics

2021 ◽  
Vol 21 (105) ◽  
pp. 19016-19039
Author(s):  
J Krause ◽  
◽  
M Cornelius ◽  
P Goldsmith ◽  
M Mzungu ◽  
...  
Keyword(s):  
Performance Metrics ◽  
Dairy Product ◽  
Value Added ◽  
Regulatory Compliance ◽  
Fixed Costs ◽  
Firm Level ◽  
Recordkeeping System ◽  
Tropical Environments ◽  
Level Data ◽  
Manufacturing Technologies

Soybean (Glycine max (L. Merr.) has been a crop of interest to address both poverty and malnutrition in the developing world because of its high levels of both protein and oil, and its adaptability to grow in tropical environments. Development practitioners and policymakers have long sought value added opportunities for local crops to move communities out of poverty by introducing processing or manufacturing technologies. Soy dairy production technologies sit within this development conceptual model. To the researchers’ knowledge, no research to date measures soy dairy performance, though donors and NGOs have launched hundreds of enterprises over the last 18 years. The lack of firm-level data on operations limits the ability of donors and practitioners to fund and site sustainable dairy businesses. Therefore, the research team developed and implemented a recordkeeping system and training program first, as a 14-month beta test with a network of five dairies in Ghana and Mozambique in 2016-2017. Learning from the initial research then supported a formal research rollout over 18 months with a network of six different dairies in Malawi and key collaboration from USAID’s Agricultural Diversification activity. None of the beta or rollout dairies kept records prior to the intervention. The formal rollout resulted in a unique primary dataset to address the soy dairy performance knowledge gap. The results of analysis show that the dairies, on average, achieve positive operating margins of 61%, yet cannot cover the fixed costs associated with depreciation, amortization of equipment and infrastructure, working capital, marketing and promotion, and regulatory compliance. The enterprises in our sample operate only at 9% of capacity, which limits their ability to cover the normal fixed costs associated with the business. The challenge is not the technology itself, as when operated, it produces a high-quality dairy product. The challenges involve a business that requires too much capital for normal operations relative to a nascent and small addressable market.

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