Multinational Enterprise and Economic Analysis, Third Edition (Cambridge Surveys of Economic Literature)

Cover......Page 1
Half-title......Page 3
Series-title......Page 4
Title......Page 5
Copyright......Page 6
Contents......Page 7
Preface......Page 11
1 The Multinational Enterprise as an Economic Organization......Page 15
1.1 Horizontal Multiplant Enterprises and the MNE......Page 16
Proprietary Assets......Page 17
Some Extensions......Page 19
Empirical Evidence: Prevalence of Horizontal Foreign Investment......Page 22
Multinationals in Service Industries......Page 27
Models of Vertical Integration......Page 29
Empirical Evidence......Page 31
Vertical Integration: Other Manifestations......Page 34
1.3 Portfolio Diversification and the Diversified MNE......Page 36
Empirical Evidence......Page 37
Geographic and Product Diversification......Page 39
1.4 Summary......Page 41
2.1 Foreign Direct Investment and International Capital Flows......Page 43
Theoretical Models of the Firm’s Decision......Page 46
Exports and Foreign Investment: Joint Determinants......Page 50
Inter-Affiliate Trade......Page 54
Differences in Production Costs: Comparative Statics......Page 55
Evidence on Tariffs and Foreign Investment......Page 56
Preferential Trading Arrangements......Page 58
2.3 Foreign Investment and Resource Allocation in the World Economy......Page 59
Basic General-Equilibrium Tools......Page 60
Foreign Investment and Specific Factors of Production......Page 64
Multinationals’ Activities in General Equilibrium: Horizontal MNEs......Page 67
Multinationals’ Activities in General Equilibrium: Vertical MNEs......Page 68
2.4 Distribution of Foreign Investment Among Countries......Page 70
Theoretical Framework and Two-Way Foreign Direct Investment......Page 71
Source Countries’ Attributes......Page 73
Affinities Between Source and Host Countries......Page 74
Host-Country Attributes......Page 76
Interregional Choices of Location......Page 77
2.5 Summary......Page 79
Adjustment Costs in Expansion of the MNE......Page 82
Firm-Specific Determinants of Foreign Investment......Page 84
Foreign Investment Decisions......Page 86
Turnover Processes......Page 88
Organizational Forms and Foreign Subsidiaries......Page 92
Economizing on Internal Coordination......Page 96
Organization and Information Links......Page 98
3.3. Effects of Organization: New Venture or Acquisition?......Page 99
Risk, Size, and Experience......Page 100
Diversity and Other Influences on Acquisition of Subsidiaries......Page 101
Statistical Tests......Page 103
3.4. Joint Ventures or Other Agreements Between Firms?......Page 105
Early Empirical Findings......Page 106
Theoretical Framework......Page 107
Wholly Owned Subsidiaries and Joint Ventures: Evidence......Page 108
Ownership Shares in Joint Ventures......Page 111
Performance of Joint Ventures......Page 112
Other Inter-Firm Agreements......Page 114
3.5 Summary......Page 116
Entry Barriers and Bases for Foreign Investment......Page 119
Effects of Concentration on Foreign Investment......Page 122
Effects of Foreign Investment on Concentration......Page 124
4.2 Market Behavior with MNEs Present......Page 127
Mutual Dependence Among MNEs......Page 128
MNEs and Other Market Rivals......Page 132
Profitability and Market Performance......Page 134
4.3 Competition Policy and National Welfare......Page 136
MNEs and the Theory of Competition Policy......Page 137
Competition Policy in Practice......Page 140
Models of Natural-Resource Extraction with Sunk Costs......Page 141
Rents and the Extractive MNE......Page 143
The Division of Resource Rents......Page 144
4.5 Summary......Page 149
5.1 Income Distribution in General Equilibrium......Page 151
Theoretical Models......Page 152
Empirical Evidence......Page 155
Investment Substitution......Page 157
Export Substitution......Page 160
Empirical Evidence......Page 162
MNEs and the Fate of Low-Skilled Labor......Page 165
5.3. Labor-Management Relations and Collective Bargaining......Page 166
Organization of Labor Relations within the MNE......Page 167
Wage Bargain: Theory......Page 168
Wage Bargaining in Practice......Page 169
5.4 Summary......Page 173
6 Investment Behavior and Financial Flows......Page 175
6.1 Capital Formation and Foreign Direct Investment Flows......Page 176
Determinants of Foreign Investment and Capital Formation Abroad......Page 177
Finance and Capital Costs......Page 179
MNEs’ Financing Practices in Market Context......Page 183
6.2. Long-Term Financing Decisions and Financial-Asset Markets......Page 184
Theory of International Capital Markets......Page 185
MNEs’ Financial Decisions......Page 187
Empirical Evidence: MNEs and Financial Diversification......Page 189
Empirical Evidence: Exchange-Rate Risks......Page 193
6.3. Foreign-Exchange Rates and Short-Term Transactions......Page 197
Responses to Expected Exchange-Rate Changes......Page 198
6.4 Summary......Page 201
7.1 The MNE as Producer of Technical Knowledge......Page 204
Foreign Investment and R&D Outlays......Page 205
Host-Country R&D Spending by MNEs......Page 206
Arm’s-Length Markets for Technology......Page 209
Factors Governing Choice......Page 212
MNEs, Technology Transfer, and the Product Cycle......Page 217
Focus on Source (Industrial) Countries......Page 220
Focus on Host (Developing) Countries......Page 225
Competition and Technology Rents......Page 226
Spillovers......Page 227
What Spills? What Is Contained?......Page 230
7.5 Summary......Page 234
8.1 Corporation Income Taxes, Market Distortions, and World Welfare......Page 236
Multiple Taxing Authorities......Page 237
Deferral, Transfer-Pricing Regulation, and Other Complications......Page 239
8.2 Tax Conventions and National Welfare......Page 241
Taxing for Monopoly Gain......Page 244
Strategic Behavior and Tax Competition......Page 247
Corporation Income Taxes and MNEs’ Location Decisions......Page 249
National Policies and National Interests......Page 252
8.4. Effects of Taxation on MNEs’ Behavior......Page 254
Tax Effects on Transactions......Page 255
Transfer Pricing......Page 259
Organizational Strategies......Page 263
8.5 Summary......Page 264
9 Multinationals in Developing Countries and Economies in Transition......Page 267
9.1. Determinants of MNEs’ Activities......Page 268
Foreign Subsidiaries Serving Domestic Markets......Page 269
Export-Processing Activities......Page 271
Government Incentives and Requirements......Page 273
Local Ownership Requirements......Page 277
Industrial Structure and Performance......Page 279
Skills, Wages, and Employment......Page 283
Choice of Technology......Page 284
Linkages......Page 288
Capital Inflows, Saving, and Balance of Payments......Page 290
Rate of Growth......Page 292
Tariff Protection, Import-Competing Foreign Investment, and Welfare......Page 293
9.3. Third-World Multinationals......Page 294
Motives for Foreign Investment......Page 295
Destinations and Activities in Host Countries......Page 296
Acquisition and Performance of Transition Firms......Page 297
Aggregate Performance in Transition Economies......Page 299
9.5 Summary......Page 300
10.1 National and International Welfare......Page 303
Taxation......Page 305
Natural-Resource Rents......Page 306
Competition Policy......Page 307
Technology Creation and Transfer......Page 308
10.2. National Policies: A Behavioral Approach......Page 309
Host Countries......Page 310
Empirical Evidence......Page 313
Source Countries......Page 317
Global and National Interests......Page 319
Treaties Governing International Investment......Page 320
10.4 Summary......Page 322
Bibliography......Page 325
Name Index......Page 389
Subject Index......Page 402