New Review Paper on Multinational Firms
| Peter Klein |
The econ and strategy literatures on multinational firms have grown dramatically since the pioneering works of Caves, Casson, Teece, and others. Besides established journals like the Journal of International Economics and Journal of International Business Studies, there is the new Global Strategy Journal and plenty of space in the general-interest journals for issues dealing with multinationals.
Pol Antràs and Stephen Yeaple have written a new survey paper for the Handbook of International Economics, 4th edition, and it’s available as a NBER working paper, “Multinational Firms and the Structure of International Trade.” The review focuses on the mainstream economics literature but should be useful for management and organization scholars as well — particularly section 7 on firm boundaries which includes both transaction cost and property rights theories. Here’s the abstract:
This article reviews the state of the international trade literature on multinational firms. This literature addresses three main questions. First, why do some firms operate in more than one country while others do not? Second, what determines in which countries production facilities are located? Finally, why do firms own foreign facilities rather than simply contract with local producers or distributors? We organize our exposition of the trade literature on multinational firms around the workhorse monopolistic competition model with constant-elasticity-of-substitution (CES) preferences. On the theoretical side, we review alternative ways to introduce multinational activity into this unifying framework, illustrating some key mechanisms emphasized in the literature. On the empirical side, we discuss the key studies and provide updated empirical results and further robustness tests using new sources of data.
The NBER version is gated but I’m sure our intrepid readers can dig up an open-access copy.