Dynamics of Large Multinationals

Elhanan Helpman and Benjamin C. Niswonger

No 29317, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a model of large multinational enterprises, each one producing a continuum of products. These outsized firms compete as oligopolists in a domestic and foreign market, facing competitive pressure from single-product firms that engage in monopolistic competition. The multinational enterprises invest in R&D in order to expand the span of their products and in foreign direct investment (FDI) in order to expand the range of products manufactured by their foreign affiliates. We study the dynamic evolution of these markets and characterize transition dynamics and steady states. In addition to the evolution of product spans, we characterize the evolution of prices, markups, market shares, and exports relative to subsidiary sales. Furthermore, we study comparative dynamics that result from changes in trade costs, R&D costs, the cost of FDI and productivity changes of the multinational firms.

JEL-codes: D43 F12 F23 L11 L13 L25 (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-com, nep-ind and nep-int
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Published as Elhanan Helpman & Benjamin Niswonger, 2023. "Dynamics of Large Multinationals," Journal of the European Economic Association, vol 21(5), pages 1994-2042.

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Working Paper: Dynamics of Large Multinationals (2021)
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