Optimal Integration Strategies for the Multinational Firm

Gene Grossman, Elhanan Helpman and Adam Szeidl
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Gene Grossman: Princeton University

No 142, Working Papers from Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics.

Abstract: We examine integration strategies of multinational firms that face a rich array of choices of international organization. Each firm in an industry must provide headquarter services from its home country, produce intermediate inputs, and assemble the intermediate goods into final products. Both production of intermediate goods and assembly can be performed at home, in another “Northern” country, in the low-wage “South,” or in several of these locations. We study the equilibrium choices of firms that differ in productivity (and thus size), focusing on the role of industry characteristics such as the fixed costs of foreign subsidiaries, the cost of transporting intermediate and final goods, and the share of the consumer market that resides in the South in determining optimal integration strategies.

Keywords: direct foreign investment; multinational corporations; intra-firm trade; vertical integration (search for similar items in EconPapers)
JEL-codes: F23 F12 L22 (search for similar items in EconPapers)
Date: 2003-11
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Related works:
Working Paper: Optimal Integration Strategies for the Multinational Firm (2003)
Working Paper: Optimal Integration Strategies for the Multinational Firm (2003)
Working Paper: Optimal Integration: Strategies for the Multinational Firm (2004)
Journal Article: Optimal integration strategies for the multinational firm (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:pri:wwseco:142

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