Production versus distribution-oriented FDI
- 355 Downloads
The business literature has long recognized the importance of multinationals’ distribution networks. The empirical analysis of distribution-oriented FDI has, however, received little attention which is at least partly due to the lack of appropriate data. We present a slightly modified version of Helpman et al. (Am Econ Rev 94(1):300–316, 2004) that explicitly models the possibility for a multinational firm to export through its wholesale trade affiliate. We analyze the multinational firms’ choice between foreign production and foreign distribution. Our empirical analysis uses different discrete choice models and alternative specifications for several sub-samples of multinational firms. Our results show that the choice between distribution and production-oriented FDI is based on the trade-off between fixed and variable costs.
KeywordsMultinational firms Wholesale sales Discrete choice
JEL classificationF23 F12 C25
- Anderson, T. (2008). US Affiliates of foreign companies: Operations in 2006. Survey of Current Business, 88(8), 186–203. http://www.bea.gov/scb/pdf/2008/08August/0808_affiliate.pdf.
- Brainard, S. L. (1997). An empirical assessment of the proximity-concentration trade-off between multinational sales and trade. American Economic Review, 87(4), 520–544.Google Scholar
- CEPII (2008a). Distances. http://www.cepii.fr/anglaisgraph/bdd/distances.htm.
- CEPII (2008b). Trade & Production. http://www.cepii.fr/anglaisgraph/bdd/TradeProd.htm.
- Clausing, K. (2000). The international trade of multinational firms: The empirical behaviour of intrafirm trade in a gravity equation model (CEPS Working Document No. 147). Brussels: Centre for European Policy Studies.Google Scholar
- Daniels, P. W. (2000). Export of services or servicing exports? Geografiska Annaler, 82(1), 1–15.Google Scholar
- Dunning, J. H. (1993). Multinational enterprises and the global economy. Suffolk: Addison-Wesley.Google Scholar
- Fontagné, L., & Toubal F. (2010). FDI and firms’ performances. CEPII, mimeograph.Google Scholar
- Gray, H. P. (1999). Global economic involvement. A synthesis of modern international economics. Copenhagen: Copenhagen Business School Press.Google Scholar
- Hirsch, S. (1993). The globalization of services and service-intensive goods industries. In K. P. Sauvant & P. Mallampally (Eds.), Transnational corporation in services. United Nations Library on Transnational Corporations, vol 12. London and New York: Routledge.Google Scholar
- Kiyota, K., & Urata, S. (2005). The role of multinational firms in international trade: The case of Japan (RIETI Discussion Paper Series 05-E-012). Tokyo: Research Institute of Economy, Trade and Industry.Google Scholar
- Krautheim, S. (2009). Export-supporting FDI. (Deutsche Bundesbank Discussion Paper Series 1: Economic Studies 20/2009). Frankfurt: Deutsche Bundesbank, Research Centre.Google Scholar
- Lipponer, A. (2009). Microdatabase direct investment—MiDi: A brief guide.Google Scholar
- Markusen, J. R., & Venables, A. J. (2000). The theory of endowment, intra-industry and multinational trade. Journal of International Economics, Technical Dokumentation, Frankfurt: Deutsche Bundesbank, 52, 209–234.Google Scholar
- Petropoulou, D. (2007). Information costs, networks and intermediation in international trade. (Economics Series Working Papers 370). Department of Economics, University of Oxford.Google Scholar
- UNCTAD (2002). Transnational corporations and export competitiveness. World Investment Report, New York and Geneva: United Nations.Google Scholar
- Wooldridge, J. M. (2002). Econometric analysis of cross-section and panel data. Cambridge: MIT Press.Google Scholar
- Zeile, W. J. (1997). US Intra-firm trade in goods. Survey of Current Business, 77(2), 23–38 (BEA).Google Scholar