Power in the Multinational Corporation in Industry Equilibrium

Dalia Marin and Thierry Verdier

No 6341, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Recent theories of the multinational corporation introduce the property rights model of the firm and examine whether to integrate our outsource firm activities locally or to a foreign country. This paper focus instead on the internal organization of the multinational corporation by examining the power allocation between headquarters and subsidiaries. We provide a framework to analyse the interaction between the decision to serve the local market by exporting or FDI, market access and the optimal mode of organization of the multinational corporation. We find that subsidiary managers are given most autonomy in their decision how to run the firm at intermediate levels of local competition. We then provide comparative statistics for changes in fixed FDI entry costs and trade costs, information technology, the number of local competitors, and in the size of the local market.

Keywords: Foreign direct investment; International organization of production; Power allocation in the firm (search for similar items in EconPapers)
JEL-codes: D23 F1 F2 (search for similar items in EconPapers)
Date: 2007-06
New Economics Papers: this item is included in nep-bec and nep-int
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Related works:
Journal Article: Power in the multinational corporation in industry equilibrium (2009)
Working Paper: Power in the multinational corporation in industry equilibrium (2009)
Working Paper: Power in the multinational corporation in industry equilibrium (2009)
Working Paper: Power in the multinational corporation in industry equilibrium (2009)
Working Paper: Power in the Multinational Corporation in Industry Equilibrium (2007)
Working Paper: Power in the Multinational Corporation in Industry Equilibrium (2007)
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