Multinational Expansion in Time and Space

Stefania Garetto, Lindsay Oldenski and Natalia Ramondo

No 25804, NBER Working Papers from National Bureau of Economic Research, Inc

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 usually start with sales exclusively to the host market and eventually enter export markets, and that this extensive margin of expansion accounts for most of their sales growth. 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 novel compound option formulation that allows us to capture in a tractable way the rich heterogeneity observed in the data, which is necessary for quantitative analysis. Using the calibrated model, our quantitative application to Brexit reveals that the nature of the frictions to MNE activities matters for understanding the reallocation of MNE activity in time and space and for predicting the effects of globalization shocks.

JEL-codes: F1 F23 (search for similar items in EconPapers)
Date: 2019-05
New Economics Papers: this item is included in nep-dge
Note: EFG IFM ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
http://www.nber.org/papers/w25804.pdf (application/pdf)

Related works:
Working Paper: Multinational Expansion in Time and Space (2019)
Working Paper: Multinational Expansion in Time and Space (2019)
Working Paper: Multinational Expansion in Time and Space (2019)
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:nbr:nberwo:25804

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w25804

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().