Power in the multinational corporation in industry equilibrium

Dalia Marin and Thierry Verdier

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: Recent theories of the multinational corporation introduce the property rights model of the firm and examine whether to integrate or outsource firm activities locally or to a foreign country. This paper focuses 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 decision power to run the firm at intermediate levels of host country competition. We then provide comparative statics on the optimal organization of the multinational corporation for changes in fixed FDI entry costs, trade costs, as well as changes in information technology.

Date: 2009
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Citations: View citations in EconPapers (13)

Published in Economic Theory 3 38(2009): pp. 437-464

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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 (2007)
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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