Physical capital, knowledge capital, and the choice between FDI and outsourcing

Yongmin Chen, Ignatius Horstmann and James Markusen

Canadian Journal of Economics, 2012, vol. 45, issue 1, 1-15

Abstract: There exist two approaches in the literature concerning the multinational firm's mode choice for foreign production between an owned subsidiary and a licensing contract. One approach considers environments where the firm transfers primarily knowledge-based assets and assumes that knowledge is non-excludable. A more recent approach takes the property-right view of the firm and assumes that physical capital is fully excludable. This paper combines both forms of capital assets in a single model. There are subtleties, and added structure is needed to establish what ex ante seems a straightforward testable hypothesis: relatively physical-capital-intensive firms choose outsourcing while relatively knowledge-capital-intensive firms choose FDI.

JEL-codes: F2 L2 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (20)

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Related works:
Journal Article: Physical capital, knowledge capital, and the choice between FDI and outsourcing (2012)
Working Paper: Physical Capital, Knowledge Capital and the Choice Between FDI and Outsourcing (2008)
Working Paper: Physical Capital, Knowledge Capital and the Choice Between FDI and Outsourcing (2008)
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