Local value chains in European MNEs

Catherine Thomas

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Ghemawat’s work in international business strategy demonstrates that Multinational Enterprises (MNEs) create value both by overcoming and by exploiting the price differences that exist at country borders. This paper evaluates the investment strategies of MNEs with subsidiaries in the 10 Central and Eastern Europe countries (CEEs) that had joined the European Union by 2007 through the lens of this insight. The data show that subsidiaries’ activities vary with the parent MNE’s home location. The CEE subsidiaries of Western European MNEs are more likely to be producing output that can be traded across country borders, particularly when their output differs from the main product of their parent company. The findings suggest Western European MNEs tend to invest in CEE countries to fragment value chains across the region, exploiting factor cost arbitrage opportunity in a semiglobalized world.

Keywords: multinational firms; global value chains; EU enlargement (search for similar items in EconPapers)
JEL-codes: J50 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2022-06-24
New Economics Papers: this item is included in nep-int and nep-tra
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Published in Strategy Science, 24, June, 2022, 7(2), pp. 75 - 89. ISSN: 2333-2050

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