EconPapers    
Economics at your fingertips  
 

Multinational Expansion in Time and Space

Stefania Garetto, Lindsay Oldenski and Natalia Ramondo

No 13704, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper studies the expansion patterns of the multinational enterprise (MNE) in time and space. Using a long panel of US MNEs, we document that: MNE affiliates grow by exporting to new markets; the activities of MNE affiliates persist during the affiliate's life, usually starting with sales to their host market and eventually expanding to export markets; and MNE affiliates' entry into new locations does not depend on the location of preexisting affiliates. Informed by these facts, we develop a multi-country quantitative dynamic model of the MNE that features heterogeneity in firm-level productivity, persistent aggregate shocks, and a rich structure of costs that affect MNE expansion. Importantly, MNE affiliates can decouple their locations of production and sales, and endogenously choose to enter or exit the host and the export markets. We introduce a compound option formulation that allows us to capture in a tractable way the rich heterogeneity that is observed in the data and that is necessary for quantitative analysis. Using the calibrated model, our quantitative application to Brexit reveals that export platforms are important for understanding the reallocation of MNE activity in time and space, and that the nature of the frictions to MNE activities matters for aggregate firm dynamics.

Keywords: Firm Dynamics; Foreign direct investment; multinational firms; sunk costs (search for similar items in EconPapers)
JEL-codes: F1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-int
Date: 2019-04
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=13704 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Multinational Expansion in Time and Space (2019) Downloads
Working Paper: Multinational Expansion in Time and Space (2019) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:13704

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... rs/dp.php?dpno=13704

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2019-06-19
Handle: RePEc:cpr:ceprdp:13704