1. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 1 Multinationals and the Location of Production Project Link United Nations May 25, 2015

2. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 2

3. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 3

4. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 4 Resource Flows to Developing Countries

5. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 5 Netting Out M&A Activity: Developing Country FDI has Grown Steadily

6. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 6 Winners and Losers from FDI Inflows in 2001

7. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 7 Who Received FDI in 2001?

8. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 8 Corporate Priorities: FDI in 2002 Most Favoured Destinations as a Percentage of MNE Responses

9. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 9 Determinants of FDI, Location of Production and Trade FDI Human Capital TechnologyInstitutions Political Expropriation Contracting Environment

10. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 10 1. Breaking Down the Value Chain

11. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 11 FDI and the Propagation of International Shocks

12. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 12 FDI and Deflation

13. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 13 2. Asset Specificity and Relationship-Specific Investments Why is FDI so intense in just a handful of industries? Why is FDI so intense in just a handful of industries?

14. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 14 3. Knowledge Creation and Control Who creates Knowledge? Who Controls Knowledge? Who creates Knowledge? Who Controls Knowledge?

15. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 15 Sony’s Flat-Screen Cathode Ray Tube (CRT)

16. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 16 FDI, Trade and IPR Regimes

17. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 17 4. Rent-Seeking Institutions Political Expropriations Legal / Contractual Environment Political Expropriations Legal / Contractual Environment

18. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 18 FDI, Trade and IPR Regimes

19. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 19 Putting a Lid on Rent-Seeking Behaviour (Skilled Sector Tariffs) – (Unskilled Sector Tariffs) Long-Run Growth (1972-2000)

20. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 20 Determinants of FDI, Location of Production and Trade FDI Human Capital TechnologyInstitutions Political Expropriation Contracting Environment

21. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 21  Virtually all of international trade in manufactures and services is done via multinationals. 1/3 is done within a firm, 1/3 is done at arm’s length in which both sides are MNCs and 1/3 is done at arm’s length in which one side is an MNC.  In short, the international location of production is determined by FDI.

22. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 22  In the 1990s FDI grew dramatically. The usual explanation is that it was driven by (in order of importance) technological forces related to the ability to direct a firm from a distance (ICT), the M&A wave which reflected changing managerial views about economies of scope versus core competence, FDI liberalization in developing countries, falling transportation costs, and trade liberalization.

23. Daniel Trefler, Rotman School of Management, Project Link, UN May 25, 2015 23  After growing since 1991, FDI contracted substantially in 2001.  Causes (in order of importance): Bursting of the bubble with its implications for equity finances, especially M&A activity and the consolidation of core competences. Slowing of economic activity in the major industrial economies. Sept. 11, war, deflation, SARS