Location decision of heterogeneous multinational firms

Maggie Chen and Michael Moore

MPRA Paper from University Library of Munich, Germany

Abstract: We examine how multinational firms with heterogeneous total factor productivity (TFP) self-select into different host countries. Both aggregate- and firm-level estimates suggest that more productive French firms are more likely than their less efficient competitors to invest in relatively tough host countries. Countries with a smaller market potential, higher fixed costs of investment or lower import tariffs tend to have higher cutoff productivities and attract a greater proportion of productive multinationals. This self-selection mechanism remains largely robust when we control for unobserved firm and country heterogeneity and address the potential TFP endogeneity.

Keywords: multinational firm; location decision; firm heterogeneity; productivity (search for similar items in EconPapers)
JEL-codes: D24 F21 F23 (search for similar items in EconPapers)
Date: 2009-08
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Citations: View citations in EconPapers (1)

Published in Journal of International Economics 80.2(2010): pp. 188-199

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Related works:
Journal Article: Location decision of heterogeneous multinational firms (2010)
Working Paper: Location Decisions of Heterogeneous Multinational Firms (2009)
Working Paper: Location Decisions of Heterogeneous Multinational Firms (2008)
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