Organization of Multinational Activities and Ownership Structure
36 Pages Posted: 19 Apr 2006
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Organization of Multinational Activities and Ownership Structure
Organization of Multinational Activities and Ownership Structure
Date Written: February 2006
Abstract
We develop a model in which multinational investors decide about the modes of organization, the locations of production, and the markets to be served. Foreign investments are driven by market-seeking and cost-reducing motives. We further assume that investors face costs of control that vary among sectors and increase in distance. The results show that (i) production intensive sectors are more likely to operate a foreign business independent of the investment motive, (ii) that distance may have a non-monotonous effect on the likelihood of horizontal investments, and (iii) that globalization, if understood as reducing distance, leads to more integration.
Keywords: Multinational firms, Joint ventures, Distance, Technology spillovers, Ownership structure
JEL Classification: F23, L24, L22, L23, D23
Suggested Citation: Suggested Citation
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