What Role for Multinationals in the New Theories of International Trade and Location?

Abstract

The paper starts with a summary of the way the new theories of international trade have incorporated the role of multinational companies (MNCs) in the location of production. The main, specific assumptions used to incorporate MNCs' activities relate to joint inputs at the company's level combined with assumptions regarding costs at the plant level and spatial transaction costs. It is claimed that this approach explains multi-plant location, although it cannot discriminate between inter-regional and the inter-national multi-plant location. It is argued that nation-states should be distinguished by their regulatory regimes. The MNCs' ability to plan and organize across different regulatory regimes may give them special advantages linked to distributional issues and spread-ofactivities strategies. These strategies may lead to a pattern of industrial location not fully congruent with the one emerging from the new trade and location theories.