The Structure of Firms' International Activities

54 Pages Posted: 3 Mar 2020

See all articles by Ronald B. Davies

Ronald B. Davies

University College Dublin (UCD)

James R. Markusen

University of Colorado at Boulder - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: February 2020

Abstract

The structure of a multinational firm, that is how its affiliates relate to one another, is critical for understanding where multinationals locate, how policy affects them, and their resilience to localized shocks. Here, we review the two main structures: horizontal investments which replicate activities across borders, and vertical investments which fragment activities across countries. In addition, we use data (primarily from the US) to examine which of these structures seems to dominate the data. This includes a novel use of measures of global value-chain positioning of a country's industries. In each case, the data suggests a dominant role for horizontal investment. We conclude with a discussion of the challenge that intangibles play in multinational data and point towards potentially fertile areas for future research.

Keywords: fragmentation, horizontal multinationals, replication, vertical multinationals

JEL Classification: F23

Suggested Citation

Davies, Ronald B. and Markusen, James R., The Structure of Firms' International Activities (February 2020). CEPR Discussion Paper No. DP14452, Available at SSRN: https://ssrn.com/abstract=3547385

Ronald B. Davies (Contact Author)

University College Dublin (UCD) ( email )

Belfield
Belfield, Dublin 4 4
Ireland

James R. Markusen

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309
United States
303-492-0748 (Phone)
303-492-8960 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
1
Abstract Views
231
PlumX Metrics