Dissipation of Knowledge and the Boundaries of the Multinational Enterprise

Valeria Gattai and Corrado Molteni

No 12077, Knowledge, Technology, Human Capital Working Papers from Fondazione Eni Enrico Mattei (FEEM)

Abstract: This paper provides a theoretical formalisation of the joint-venture contract, as an alternative to Foreign Direct Investment (FDI), within a Dissipation of Intangible Assets framework. In a two-period model, we discuss how the threat of knowledge spillover shapes the boundaries of a Multinational Enterprise. Similarly to the theoretical findings on the FDI-licensing trade off, we show that the integrated solution is more likely to emerge when know-how easily spills over - i.e. when firms are endowed with more Intangible Assets or they belong to high tech industries. Probit estimates, from a new firm-level dataset, show that Japanese manufacturing operations in Europe are in line with these predictions.

Keywords: International; Relations/Trade (search for similar items in EconPapers)
Pages: 40
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemkt:12077

DOI: 10.22004/ag.econ.12077

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