The Geography of Multinational Firms

Pontus Braunerhjelm and Karolina Ekholm Over recent decades, foreign direct investment (FDI) has become a major force in the global economy. The geographical pattern of capital formation, trade and technological spillovers across countries and regions, are to an in creasing extent determined by the strategies chosen by multinational firms (MNFs). Between 1982 and 1994, the rate of growth of the global FDI stock was more than twice that of gross fixed capital formation, the growth of sales by foreign affiliates of multinational firms well exceeded that of world exports, and, by 1994, the MNFs accounted for approximately 6 percent of world output (United Nations, 1997, pp. xv-xvi). The overall mechanisms behind this rapid internationalization in terms of multinational produc tion have been attributed to the dismantling of trade barriers and the deregulation of capital markets, together with the advances in information technology that have facilitated the coordination and monitoring of inter nationally dispersed production. This development carries two important implications: First, firms operate in markets characterized by much tougher competition than only a decade ago, and, second, countries and regions are involved in competition for production to a much larger extent than before. This book addresses questions related to the location and geographical dispersion of the activities by multinational firms, a topic which has be come of increasing concern to policy-makers.

Klappentext

The Geography of Multinational Firms addresses the implications of multinational production, and the forces that determine location. The analytical framework builds on recent developments in the theory of location and multinational production. In addition, more micro-oriented aspects of agglomeration are incorporated into the analysis. The issues addressed include the following: What determines the choice of entry mode and the choice between exports and affiliate production? How important are agglomeration forces in determining the location of affiliate production and R&D? What is the nature of intra-firm trade flows? The main focus of this book is on empirical issues, although the hypotheses tested are solidly founded in theory. The analysis is based upon a unique data-set embracing approximately 90 percent of Swedish multinational firms in the period 1965 to 1994, with emphasis on developments in the period 1980 to 1994.

Inhalt
1 Introduction.- 1.1 Outline of the Book.- 1.2 Summary of Main Findings.- 1.3 References.- 2 Multinational Enterprises, and the Theories of Trade and Location.- 2.1 Introduction.- 2.2 Background.- 2.3 A Knowledge-Capital Approach.- 2.4 A Model with Endogenous Multinationals.- 2.5 Production Regimes and the Direction of Trade.- 2.6 Investment Liberalization, the Volume and Direction of Trade.- 2.7 Investment Liberalization, Factor Prices, and Income Distri bution.- 2.8 Summary.- 2.9 References.- 3 Geographical Specialization of US and Swedish FDI Activity.- 3.1 Introduction.- 3.2 Determinants of FDI.- 3.3 The Pattern of Swedish and US FDI.- 3.4 Conclusion.- 3.5 References.- 3.A Appendix.- 4 Proximity Advantages, Scale Economies, and the Location of Production.- 4.1 Introduction.- 4.2 Evidence on the Country Pattern of Trade and Foreign Production.- 4.3 Determinants of the Country Pattern of Foreign Production.- 4.4 The Proximity-Concentration Hypothesis.- 4.5 Conclusions.- 4.6 References.- 5 Organization of the Firm, Foreign Production and Trade.- 5.1 Introduction.- 5.2 Swedish MNFs, Trade and Foreign Production.- 5.3 Theoretical Explanations to Integrated Production Structures.- 5.4 Hypotheses and Empirical Analysis.- 5.5 Concluding Remarks.- 5.6 References.- 6 Agglomeration in the Geographical Location of Swedish MNFs.- 6.1 Introduction.- 6.2 The Clustering of Economic Activities Previous Research.- 6.3 Empirical Agglomeration Studies.- 6.4 Foreign Production by Swedish MNFs and Agglomeration in Location.- 6.5 Final Remarks.- 6.6 References.- 7 Locating R&D Abroad: The Role of Adaptation and Knowledge-Seeking.- 7.1 Introduction.- 7.2 Internationalization and Geographical Distribution of R&D.- 7.3 Determinants of Foreign Affiliate R&D.- 7.4 Data, Method andVariables.- 7.5 Empirical Results.- 7.6 Concluding Remarks.- 7.7 References.- 7.A Appendix.- 8 Patterns of Foreign Direct Investment into Sweden.- 8.1 Introduction.- 8.2 Historical Background.- 8.3 Recent Trends in FDIs.- 8.4 Specialization- and Trade Patterns.- 8.5 Geographical Localization and Agglomeration.- 8.6 Concluding Comments.- 8.7 References.- 9 The Choice of Entry Mode in Foreign Direct Investment: Market Structure and Development Level.- 9.1 Introduction.- 9.2 Theoretical Bases for the Choice of Entry mode.- 9.3 Host Country Factors Influencing the Entry Mode Decision.- 9.4 Descriptive Statistics and Statistical Tests for Swedish MNFs.- 9.5 Concluding Remarks.- 9.6 References.- 10 Strategic Location of Production in Multinational Firms.- 10.1 Introduction.- 10.2 Multi-Plant Economies of Scale.- 10.3 Strategic Investment.- 10.4 Multi-Market Competition.- 10.5 Discussion and Conclusions.- 10.6 References.- A Appendix: Statistical Tables.- A Appendix: IUI Survey Questionnaire.