We study patterns of FDI in a multi-country world economy. First, we present evidence for a broad sample of countries that firms direct FDI disproportionately to markets with income levels similar to their home market. Then we develop a model featuring non-homothetic preferences for quality and...

This paper investigates the extent to which expansion of international production by US multinationals reduces labour demand at home and at other foreign locations in the presence of labour adjustment costs. The adjustment-cost model of the firm is applied to estimate short-run and long-run...

The global pattern of foreign direct investment (FDI) is quite similar to the world trade pattern. In particular, intra-industry FDI between rich nations is almost as pervasive as intra-industry trade among rich nations. In the ‘standard’ multinational corporation (MNC) model (of Markusen,...

We analyze the optimal debt structure of multinational corporations choosing between centralized or decentralized borrowing. We identify how this choice is affected by creditor rights and bankruptcy costs, taking into account managerial incentives and coinsurance considerations. We find that...

We analyze a model where a multinational firm can use a superior technology in a foreign subsidiary only after training a local worker. Technological spillovers from foreign direct investment arise when this worker is later hired by a local firm. Pecuniary spillovers arise when the foreign...

We examine integration strategies of multinational firms that face a rich array of choices of international organization. Each firm in an industry must provide headquarter services from its home country, but can produce its intermediate inputs and conduct assembly operations in one or more of...

This paper examines spillover effects of the activities of multinational firms (MNCs). Such effects are most likely to be found in host countries, where the operations of foreign multinationals may influence local firms in the MNC’s own industry as well as firms in other industries. There is...

This Paper extends the theory of multinational corporations, identifying three distinct influences of internal trade liberalization by a group of countries on the level and pattern of inward foreign direct investment (FDI). First, the tariff-jumping motive encourages plant consolidation. Second,...

We study the determinants of the extent of outsourcing and of direct foreign investment in an industry in which producers need specialized components. Potential suppliers must make a relationship-specific investment in order to serve each prospective customer. Such investments are governed by...

This paper reviews and synthesizes the available literature focusing on the determinants of efficiency spillovers from inward FDI. In order to do so, we outline a theoretical framework for understanding the underlying 'supply' and 'demand' forces determining the scope and magnitude of FDI...