The Battle over Knowledge: Multinationals, Diffusion, and Governance

Laura Alfaro, Maggie Chen and Beata S. Javorcik

No 14608, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: Multinational corporations (MNCs) are the dominant institutions for creating and distributing knowledge across borders. Their activities generate geopolitical externalities when cross-border knowledge spillovers enhance a rival states strategic capabilities in ways neither internalized by firms nor priced by markets. This review examines MNC-mediated knowledge creation and diffusion and the governance regime that has emerged in response. We distinguish three types of knowledge codified, tacit, and organizational that differ in their transmission channels and governability, and trace how each is created within MNC networks, diffused within and across firm boundaries, and targeted by policy instruments. Evidence shows that controls induce compensating responses, including redirected innovation, supply-chain reconfiguration, and organizational restructuring, with uncertain net effects. Linking the theory of the multinational firm to the economics of geopolitical rivalry, the review highlights the trade-offs that knowledge governance imposes on the global economy.

Keywords: Multinational; Diffusion; Geopolitical externality (search for similar items in EconPapers)
JEL-codes: F20 F52 L23 O30 (search for similar items in EconPapers)
Date: 2026-05
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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:14608

DOI: 10.18235/0014056

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