DMCA
A simple theory of multinational corporations and trade with a trade-off between proximity and concetration", NBER working paper (1993)
| Citations: | 183 - 1 self |
BibTeX
@MISC{Brainard93asimple,
author = {S. Lael Brainard and S. Lael Brainard},
title = {A simple theory of multinational corporations and trade with a trade-off between proximity and concetration", NBER working paper},
year = {1993}
}
Share
 |
 |
 |
 |
||
OpenURL
Abstract
with a Trade-off between Proximity and Concentration This pap>er develops a two-sector, two-country model, where firms in a differentiated products sector choose between exporting and multinational expansion as alternative modes of foreign market penetration, based on a trade-off between proximity and concentration advantages. The differentiated sector is characterised by multi-stage production, with increasing returns at the corporate level associated with some activity such as R&D, scale economies at the plant level, and a variable transport cost that rises with distance. A pure multinational equilibrium, where two-way horizontal expansion across borders completely supplants two-way trade in differentiated products, is possible even in the absence of factor proportion differences. It is more likely the greater are transport costs relative to fixed plant costs, and the greater are increasing returns at the corporate level relative to the plant level. The model also establishes conditions for a mixed equilibrium, in which national and multinational firms coexist. * First draft August 1992.
Keyphrases
simple theory multinational corporation plant level differentiated sector plant cost corporate level relative concentration advantage differentiated product sector scale economy corporate level transport cost multi-stage production two-way horizontal expansion multinational expansion foreign market penetration multinational firm mixed equilibrium alternative mode factor proportion difference supplants two-way trade two-country model pure multinational equilibrium first draft august variable transport cost differentiated product
