Horizontal Multinational Firms, Vertical Multinational Firms and Domestic Investment

Julian Emami Namini and Enrico Pennings
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Julian Emami Namini: Erasmus University Rotterdam

No 09-004/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We build a dynamic general equilibrium model with 2 countries, horizontal and vertical multinational activity and endogenous domestic and foreign investment. It is found that horizontal multinational activity always leads to a complementary relationship between domestic and foreign investment. Vertical multinational activity, in contrast, leads to either a substitutional or complementary relationship between domestic and foreign investment, depending on the firms' technologies. We test the theoretical implications with a panel of U.S. multinationals and find empirical support.

Keywords: Horizontal multinational firms; vertical multinational firms; domestic investments; neoclassical growth model (search for similar items in EconPapers)
JEL-codes: E22 F21 F23 (search for similar items in EconPapers)
Date: 2009-01-15
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20090004

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