 The hardships of long distance relationships: time zone proximity and the location of MNC's knowledge-intensive activitiesJournal of International Economics, 2020, vol. 125, issue C Abstract: Using a unique global dataset on multinational corporations (MNCs) with precise location of headquarters and affiliates, I present evidence of a trade-off between distance to the headquarters and knowledge intensity of the affiliates' economic activity. This trade-off is strongly diminished the higher the overlap in working hours between the headquarters and the affiliate. In order to rule out biases arising from confounding factors, I implement a regression discontinuity framework to show that the economic activity of a subsidiary located just across the time zone line which increases the overlap in working hours with its headquarters is, on average, roughly 1% higher on the knowledge intensity scale. The results are present only for foreign horizontal subsidiaries. Overall, the findings suggest that barriers to real-time communication within MNCs play an important role in the location decisions of their subsidiaries. Keywords: Time zones; Multinational corporations; Knowledge; Distance; FDI (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:125:y:2020:i:c:s0022199620300295 DOI: 10.1016/j.jinteco.2020.103311 Access Statistics for this article Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and RodrÃguez-Clare, Andrés More articles in Journal of International Economics from Elsevier |
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