Reputational Comparative Advantage and Multinational Enterprise

Richard Chisik

No 16, Working Papers from Toronto Metropolitan University, Department of Economics

Abstract: For a firm without a readily identifiable brand name, quality reputation may solely reflect the country of origin. In this paper we endogenize country-of-origin reputations and show that these selffulfilling reputations determine not only the average quality of a country’s exports but also the type of products in which a country specializes. Hence, the pattern of international trade can be determined by reputational comparative advantage. Specialization according to reputational comparative advantage can also establish the location of the host and the parent firm in a multinational enterprise. Furthermore, multinationals that internalize production in a single firm can eradicate a low reputation equilibrium and, therefore, can increase host-country welfare by a greater amount than under a licensing arrangement. Finally, this reputation effect can identify whether internalization, or licensing, is more likely to occur.

Keywords: Country-of-Origin; Quality Reputations; Multinational Enterprise; Internalization; Statistical Discrimination. (search for similar items in EconPapers)
JEL-codes: F12 F23 J71 L15 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2010-08
New Economics Papers: this item is included in nep-int
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Reputational Comparative Advantage and Multinational Enterprise (2002)
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