Economics of Scope, Agglomeration and Location of the Multinational Firm

José Pontes and John B. Parr

No 2004/04, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: A classification of the locational patterns of firms (with economies of scope present) is outlined, in order to cast light on the location of the multiplant, multinational firm. This is driven by three forces: economies of scope that follow from the co-location of different activities; transportation costs of the final good; and factor mobility costs. It is concluded that the single-plant firm prevails when spatial economies of scope are strong in relation to either transportation or mobility costs. The vertical (horizontal) multiplant firm emerges when mobility costs of factors (transportation costs on the final good) are high. These two kinds of spatial costs, which are mutually exclusive, favor the formation of multinational firms.

Keywords: Economies of scope; Economies of agglomeration; Multiplant firms; Multinational firms. (search for similar items in EconPapers)
JEL-codes: F23 R30 (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-geo and nep-ure
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