Post-production services and optimal integration strategies for the multinational firm

Seungrae Lee ()
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Seungrae Lee: Kyungpook National University

Review of World Economics (Weltwirtschaftliches Archiv), 2016, vol. 152, issue 4, No 1, 597-628

Abstract: Abstract This paper examines firms’ decision of integrating production and post-production services to serve foreign markets. The author builds a model in which heterogeneous firms choose different locations to produce output, while employ local or send home managers from headquarters to provide post-production services. The model shows that the equilibrium decision of a firm depends on its own productivity level and the mobility of transferring home managers across borders. Using Korean firm- and affiliate-level data, empirical results show that firms choose production locations based on their productivity levels and transport costs, while firms’ choice of service managers depend on informal trade barriers across borders. These findings are consistent with the theoretical implications.

Keywords: Foreign direct investment; Production location; Post-production services (search for similar items in EconPapers)
JEL-codes: F12 F15 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10290-016-0257-x

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