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Introduction The size and structure of multinationals Foreign direct investment Explaining multinationals Multinationals in general equilibrium Characterization.

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Presentation on theme: "Introduction The size and structure of multinationals Foreign direct investment Explaining multinationals Multinationals in general equilibrium Characterization."— Presentation transcript:

1 Introduction The size and structure of multinationals Foreign direct investment Explaining multinationals Multinationals in general equilibrium Characterization of equilibrium Case study: hard disk drives Conclusions CHAPTER 15; MULTINATIONALS International Trade & the World Economy;  Charles van Marrewijk

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3 Introduction The size and structure of multinationals Foreign direct investment Explaining multinationals Multinationals in general equilibrium Characterization of equilibrium Case study: hard disk drives Conclusions CHAPTER 15; MULTINATIONALS International Trade & the World Economy;  Charles van Marrewijk

4 Introduction International Trade & the World Economy;  Charles van Marrewijk Joseph Schumpeter ( )

5 Introduction The size and structure of multinationals Foreign direct investment Explaining multinationals Multinationals in general equilibrium Characterization of equilibrium Case study: hard disk drives Conclusions CHAPTER 15; MULTINATIONALS International Trade & the World Economy;  Charles van Marrewijk

6 The size and structure of multinationals International Trade & the World Economy;  Charles van Marrewijk

7 The size and structure of multinationals International Trade & the World Economy;  Charles van Marrewijk

8 The size and structure of multinationals International Trade & the World Economy;  Charles van Marrewijk

9 The size and structure of multinationals International Trade & the World Economy;  Charles van Marrewijk

10 The size and structure of multinationals International Trade & the World Economy;  Charles van Marrewijk

11 The size and structure of multinationals International Trade & the World Economy;  Charles van Marrewijk

12 Introduction The size and structure of multinationals Foreign direct investment Explaining multinationals Multinationals in general equilibrium Characterization of equilibrium Case study: hard disk drives Conclusions CHAPTER 15; MULTINATIONALS International Trade & the World Economy;  Charles van Marrewijk

13 Foreign direct investment International Trade & the World Economy;  Charles van Marrewijk

14 Foreign direct investment International Trade & the World Economy;  Charles van Marrewijk

15 Foreign direct investment International Trade & the World Economy;  Charles van Marrewijk

16 Foreign direct investment International Trade & the World Economy;  Charles van Marrewijk

17 Introduction The size and structure of multinationals Foreign direct investment Explaining multinationals Multinationals in general equilibrium Characterization of equilibrium Case study: hard disk drives Conclusions CHAPTER 15; MULTINATIONALS International Trade & the World Economy;  Charles van Marrewijk

18 Dunning’s OLI framework: Ownership advantages Location advantages Internalization advantages Empirical characteristics of multinationals: high ratios of R&D relative to sales employ large numbers of scientific, technical, and other 'white collar' workers as a percentage of their work force high value of 'intangible' assets associated with new and/or technically complex products negatively associated with plant-level scale economies associated with product-differentiation variables (e.g. advertising/sales) A minimum or 'threshold' level of firm size seems to be important Multinationals tend to be older, more established firms. Explaining multinationals International Trade & the World Economy;  Charles van Marrewijk

19 Introduction The size and structure of multinationals Foreign direct investment Explaining multinationals Multinationals in general equilibrium Characterization of equilibrium Case study: hard disk drives Conclusions CHAPTER 15; MULTINATIONALS International Trade & the World Economy;  Charles van Marrewijk

20 Multinationals in general equilibrium International Trade & the World Economy;  Charles van Marrewijk Markusen-Venables model Perfect competition and CRS for food sector. Imperfect competition and IRS for manufacturing sector Production of manufactures characterized by c - the (constant) marginal production costs in terms of labor t - the amount of labor needed to transport one unit of manufactures from Austria to Bolivia, or vice versa. F - the firm level fixed costs in terms of labor. G - the plant level fixed costs in terms of labor.

21 m B ; multinational firm, headquarters in Bolivia MC in A = cw A MC in B = cw B Multinationals in general equilibrium International Trade & the World Economy;  Charles van Marrewijk m A ; multinational firm, headquarters in Austria MC in A = cw A MC in B = cw B n B ; national firm, headquarters in Bolivia MC in A = (c+t)w A MC in B = cw B n A ; national firm, headquarters in Austria MC in A = cw A MC in B = (c+t)w B Headquarters in Austria Firm level fixed costs Fw A Plant level fixed costs Gw A Plant level fixed costs Gw B Multi-plant production? + yes no Headquarter location Headquarters in Bolivia Firm level fixed costs Fw B Plant level fixed costs Gw B Plant level fixed costs Gw A Multi-plant production? + yes no

22 Introduction The size and structure of multinationals Foreign direct investment Explaining multinationals Multinationals in general equilibrium Characterization of equilibrium Case study: hard disk drives Conclusions CHAPTER 15; MULTINATIONALS International Trade & the World Economy;  Charles van Marrewijk

23 Characterization of equilibrium International Trade & the World Economy;  Charles van Marrewijk

24 Characterization of equilibrium International Trade & the World Economy;  Charles van Marrewijk

25 Introduction The size and structure of multinationals Foreign direct investment Explaining multinationals Multinationals in general equilibrium Characterization of equilibrium Case study: hard disk drives Conclusions CHAPTER 15; MULTINATIONALS International Trade & the World Economy;  Charles van Marrewijk

26 Case study: hard disk drives International Trade & the World Economy;  Charles van Marrewijk

27 Case study: hard disk drives International Trade & the World Economy;  Charles van Marrewijk

28 Introduction The size and structure of multinationals Foreign direct investment Explaining multinationals Multinationals in general equilibrium Characterization of equilibrium Case study: hard disk drives Conclusions CHAPTER 15; MULTINATIONALS International Trade & the World Economy;  Charles van Marrewijk

29 Conclusions International Trade & the World Economy;  Charles van Marrewijk Multinationals are becoming increasingly important (w.r.t. production, investment, and trade) Most multinationals in OECD countries Most FDI horizontal acquisitions between OECD countries Explaining multinationals Descriptive OLI framework Modern general equilibrium framework Modern framework determines market structure endogenously; results confirm reasonably well with stylized facts (multinationals dominate if countries are more similar; national firms dominate if countries differ in size or relative endowment)


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