Presence Of Multinationals Research Articles

What is the Appropriate Size of the Banking System?

To measure the size of the banking system, a country’s banking assets divided by the country’s gross domestic product (GDP) is commonly applied as a yardstick. But is the banking assets to GDP ratio an appropriate yardstick? This paper shows that comparing a country’s banking sector only by using that country’s GDP does not capture the whole story as countries have distinctive financial needs. In particular, countries differ with regard to the number and size of multinational enterprises. In a cross-country empirical study, we find a statistically significant relationship between the presence of large banks and the presence of multinationals, after controlling for the size of the country. We therefore suggest using an additional yardstick, which compares the size of large banks to the size of multinationals in a country.

Multinational presence and the export participation of local firms in Ghana

This article examines whether the presence of multinationals affects the export participation of local firms in the same industry using data on manufacturing firms in Ghana. We find robust evidence consistent with the idea of spillovers from multinationals to Ghanaian exporters. We also observe that larger firms and firms that exported in the past are more likely to export. Our results remain unchanged after we control for potential spillovers from other exporters. These results have useful implications for both Ghana's trade and Foreign Direct Investment (FDI) policies.

Multinational Exposure and the Quality of New Chinese Exports

AbstractWe exploit information on the geographic, product and trader characteristics of China's 1997–2009 exports to examine how the evolving city‐industry presence of multinational firms influenced the quality, frequency and survival of new export transactions by private Chinese firms. Our results show that own‐industry multinational firm contact was associated with more frequent, higher‐valued, and longer‐lasting new trade transactions. These effects appear to arise from beneficial multinational spillovers, rather than selection effects due to increased multinational competition, as increases in own‐industry or other multinational presence were also associated with an increase in the number of trade transactions introduced by private Chinese firms.

Foreign direct investment: Domestic alliance experience as an antecedent to international expansion

This paper explores the extent to which multinational enterprise presence can affect local firms. More specifically, it investigates how alliances with foreign firms may bring about knowledge spill...

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Reflexiones sobre la integración latinoamericana

A regional integration agreement based on the principle of solidarity development of the group, based on broader criteria of reciprocity and a perspective of expanding investments, constitutes an advantage for all countries. In this paper it is argued that integration is convenient, that the presence and risk of multinationals must be counted on and minimized through the means provided by the integration itself. It is also postulated that multinational integration, instead of being an inconvenience for intranational regional integration, is exactly the opposite, an instrument of this to the extent that it translates into integration through participation and not through internal colonialism. Finally, the viable options in the current conditions of the ideology and practice of Latin American integration are exposed.

Multinational risk and performance outcomes: Effects of knowledge intensity and industry context

A multinational presence can diversify corporate business activities and provide access to diverse overseas resources. This can enhance operational flexibility and create new business propositions that increase responsiveness to global market changes. Establishing an international corporate structure may also require irreversible investments and impose maintenance and processing costs that contravene the implied resilience and agility benefits. We distinguish between downside risk and upside potential as the relevant outcome measures to assess the implied advantages of multinationality. Consistent with the rationales of the OLI paradigm, we argue that multinational reach particularly in knowledge-based industries can reduce downside risk and enhance upside potential. These results introduce more nuances to the ongoing debate about multinational risk and performance effects. Based on a large cross-sectional dataset, we find that flexibility and responsiveness thrives on a multinational presence among firms operating in information-driven knowledge businesses. In contrast, internationalizing firms in capital-based network services display adverse risk effects.

The risk implications of multinational enterprise

PurposeMultinational structure has been linked to operational flexibilities that can improve corporate adaptability and a knowledge‐based view suggests that multinational resource diversity can facilitate responsive opportunities. The enhanced maneuverability from this can reduce earnings volatility and hence the corporate performance risk. But, the internationalization process may also require irreversible investments that increase corporate exposures and leave the risk implications of multinational enterprize somewhat ambiguous. Hence, the purpose of the paper is to present an empirical study of the implied relationships between the degree of multinationality and various risk measures including downside risk, upside potential, and performance risk.Design/methodology/approachThe paper provides a brief literature review, develops hypotheses, and tests them in two‐stage least square regressions on archival data to control for pre‐selection biases.FindingsThe analyses indicate that multinationality is associated with lower downside risk as well as higher upside potential and leads to reduced performance risk. The study finds no trace of diminishing effects from higher degrees of multinationality.Research limitations/implicationsThe empirical study uses a sample of large US‐based corporations, which could affect the generalizability of results. However, this is consistent with other studies and eases comparability of findings.Practical implicationsThe findings add to the ongoing debate about the risk effects of a multinational corporate structure and confirms that a diverse multinational presence is associated with positive risk outcomes.Originality/valueThe paper complements a limited number of studies with equivocal results and adopts alternative risk outcome measures. The study extends the industry scope by introducing a comprehensive sample of firms operating in different manufacturing and service businesses.

Patent Laws, Product Lifecycle Lengths, and the Global Sourcing Decisions of U.S. Multinationals

This paper investigates the impact of patent laws on firms’ global sourcing decisions. I develop a theoretical model of multinational firms’ location and production decisions in the presence of cross-country differences in intellectual property rights and cross-sector differences in the length of product lifecycles. I show that patent reforms are irrelevant to firms’ sourcing decisions in industries with rapid product turnover. By contrast, strong patent laws attract affiliate activity in industries with longer product lifecycles, because products in these industries are more likely to be imitated prior to obsolescence and are thus more reliant on patent enforcement to protect revenues. These effects are more pronounced for less-productive firms. Using comprehensive panel data on the sales, assets, and employment of U.S. multinationals and their affiliates abroad and a new measure of product obsolescence, I find robust empirical support for these predictions. Effects are significant along all margins of multinational activity, including multinational presence by country and sector, total affiliate sales conditional on presence, the number of affiliates, and affiliate-level sales. In addition, I find that stronger patent rights tilt the balance of cross-border activity away from exports and toward multinational activity. Finally, my identification strategy allows me to isolate the causal effect of patent reforms on multinational operations, which the prior literature has struggled to establish because of concurrent policy reforms.

Strategic tariffs, tariff jumping, and heterogeneous firms

The majority of research to date investigating strategic tariffs in the presence of multinationals finds a knife-edge result where, in equilibrium, all foreign firms are either multinationals or exporters. Utilizing a model of heterogeneous firms, we find equilibria in which both pure exporters and multinationals coexist. We utilize this model to study the case of endogenously chosen tariffs. As is standard, Nash equilibrium tariffs are higher than the socially optimal tariffs. Unlike existing models with homogeneous firms, we find that non-cooperative tariffs promote the existence of low-productivity firms relative to the socially optimal tariffs. This highlights a new source of inefficiency from tariff competition not found in models of homogeneous firms. In addition, we find that in many cases the Nash equilibrium tariff when FDI is a potential firm structure is lower than when it is not. As a result, FDI improves welfare by mitigating tariff competition.

Technological spillovers from multinational presence

This article undertakes a critical review of existing spillover analyses and proposes a unique analytical framework for examining technological spillovers in a manufacturing industry setting. The proposed framework overlaps three different literature strands: cluster and network dynamics, technological innovations and spillover literature. It enables to determine the extent to which multinational presence in a host country stimulates spillover occurrence to local firms as well as their nature. Using this framework, the kinds of spillovers and the channels through which they occur most can be equally determined – this is particularly relevant for policy intervention in a technically backward country. Finally, it allows determination of factors and conditions under which spillovers from multinationals occur.

The Dynamics of Sustained Environmental Resource Crisis in the Niger Delta Region of Nigeria: A Theoretical Periscope

The Niger Delta region of Nigeria witnessed a remarkable upsurge inenvironmental resource crisis as a result of the presence of oil multinationals in the region. The mass media flash before the public a vivid and multi varied images of violent behaviour that characterized social interactions in the region. The youths in the Niger Delta whose occupational aspirations are blocked due to persistent hydrocarbon extraction in their region resorted to violent behaviour as a rational response to the monumental deprivation and marginalization by the multinational oil companies and their accomplice in the Nigerian state. The paper adopts George Homan’s social exchange theory in providing understanding for the sustained environmental resource crisis. The paper argues that the sustenance of youth violent oriented behaviour is a natural outgrowth of the social exchange relationship that exist between people of oil bearing communities and the various actors in the hydrocarbon extraction companies. The paper suggests the options of real fiscal autonomy for the federating units, resource control, creating employment and skill acquisition scheme for the displaced youths as mitigation measures to curb the age long environmental resource crisis in the Niger Delta.

Estimation of trade elasticities in the presence of trade barriers, multinationals and imperfect competition

Recent research highlights the role that multinational trading companies may play in impeding price transmission. In markets characterised by imperfect competition, an estimate of the partial elasticity of demand may be of limited practical value if no account is taken of the reaction of competitors. In this paper, we demonstrate the potential for market structure to affect price transmission and trade elasticities, and challenge the presumption that only government intervention can impact upon price transmission, with examples supporting why theory would suggest otherwise.

Global Links: Multinationals in Canada: An Overview of Research at Statistics Canada

The paper's main objective is to provide a concise synthesis of a wide array of data and research on multinationals originating in Statistics Canada, focusing on both historical and current studies. Chapter 2 discusses the macroeconomic contribution of foreign multinationals, focusing on two leading indicators of foreign multinational activity, foreign control and foreign direct investment. This chapter also describes studies that evaluate the contribution that foreign-controlled companies make to aggregate trade flows, linking changes in multinational trade intensity to the strategic reorganization of their production activities. Chapter 3 concentrates on the strategies and activities of foreign multinationals that are relevant to ongoing debates over whether the presence of foreign multinationals promotes, or hampers, Canada's industrial competitiveness. This chapter first examines evidence that domestic and foreign firms respond differently to domestic market conditions. Second, it asks whether foreign firms compete in different ways than domestic firms do. Third, it examines the relative emphasis that foreign multinationals place on innovation and technology practices, and reports on the relationship between these activities and observable market outcomes. Fourth, it reports on the contribution that foreign-controlled firms make to productivity growth. Fifth, it discusses new research that focuses on the relationship between foreign ownership and head-office employment. Studies in these areas speak directly to the issue of whether foreign multinationals truncate or develop their corporate activities in host markets. Chapter 4 focuses on studies that examine the foreign activities of Canadian-owned multinationals and how their domestic plants compare to foreign-controlled plants operating in Canada. Chapter 5 offers an appraisal of Statistics Canada's research on multinationals.

Multinational firms, global value chains and the organization of knowledge transfer

This paper combines insights from different streams of literature to develop a more comprehensive framework for the analysis of knowledge transfer via value chain relationships. We integrate the existing literature in three ways. First, we consider value chain relationships as a multi-facet process of interaction between buyers and suppliers, involving different modes of knowledge transmission and development. Second, we assess whether and to what extent value chain relationships are associated with the presence of multinationals and with their embeddedness in the host economy. Third, we take into account the capabilities of local firms to handle the technology as a factor influencing knowledge transfer through value chain relationships. Using data on 1385 firms active in Thailand in 2001–2003, we apply a multinomial logit model to test how the nature and intensity of multinational presence and the competencies of local firms affect the organization of international knowledge transfer. We find that knowledge intensive relationships, which are characterized by a significant transmission of technical and organizational competencies along the value chains, are positively associated with the presence of global buyers in the local market, with the efforts of MNCs to adapt technology to local contexts, and with the technical capabilities of domestic firms. By contrast, the age of subsidiaries and the share of inputs purchased locally appear to increase the likelihood of value chain relationships with a lower technological profile.

Bidding for Horizontal Multinationals

We present a model in which governments bid for firms by taxing/subsidizing setup costs. Firms choose both the number and the location of the plants they operate, and the equilibrium industry structure is affected by governments’ subsidy choices. We show that the endogenous presence of horizontal multinationals attenuates the race to the bottom and yields some results that run counter to traditional findings in the literature. First, in the presence of multinationals, increasing subsidies decrease firms’ profits by exacerbating price competition due to more firms going multinational. Second, instead of being always subsidized, firms may actually be taxed in equilibrium. Last, subsidies may become strategically independent policy instruments, instead of being strategic complements.

Trade and Technology Progress: An Analysis for Uruguay

We examine technology spillovers to Uruguayan manufacturing firms through imports, foreign direct investment (FDI) and learning by exporting, for the period 1997-2001. This work provides evidence of the dynamic gains from trade openness for a small developing country, analysing simultaneously the various possible channels of international technology diffusion at the firm level. We find evidence of positive effects on production of imported intermediates and backward linkages with foreign firms. On the other hand there is evidence of negative effects of multinational presence at the industry level, while results for exporting are mixed. Finally, the results would indicate that absorptive capacity matters to take advantage of increased openness and FDI, so policies aimed to improve absorptive capacity such as investing in R&D and improving the skills of workers through training are likely to play a role in facilitating knowledge spillovers.

Arranjo Produtivo Local: O Caso da Piscicutura na Região de Dourados/Ms

This study uses the concepts of economic development from the perspective of local production arrangements (APL), with a focus on local development, and aims to analyze the psciculture activity in Dourados region, in Mato Grosso do Sul. APLs are known as the productive matrix activities based on the economy of proximity and is represented mainly by small and medium-sized companies which represent specific forms of production organization. These are integrated to the territory and are capable of autonomous development, based on the action as a main territorial propulsion development. The region of Dourados, located in the State of Mato Grosso do Sul, stands out in the national market for the production of grains and the creation of cattle and chickens, with the presence of multinationals around. Parallel to these activities, psiculture has been highlighted in the state as an economic activity with high development potential and an alternative income for small landowners in the region, which concentrates more than 60% of the pool for the activity of psiculture in the State of Mato Grosso do Sul.

Multinationals and the creation of Chinese trade linkages

Abstract. This paper studies the relationship between multinational firm proximity and the formation of new export connections by private Chinese exporters between 1997 and 2003. The results indicate that growth in the presence of multinational firms is positively associated with the formation of new trade by local Chinese firms. Further exploration suggests that information spillovers may drive this result, as the positive association due to own‐industry multinational presence is particularly strong in contexts where information improvements may be the most helpful. Thus, it appears that a growing presence of multinational firms may enhance the export capabilities of local domestic firms.

Multinationals and plant exit: Evidence from Chile

This paper investigates three main questions: are affiliates of foreign multinationals more likely to exit than domestic firms? Does the exit probability of multinationals depend on its export orientation?, and Does the presence of multinationals affect the survival of other firms in the economy? Our results show that foreign plants are more likely to exit the economy, controlling for other firm and industry characteristics, only during the late 1990s, a period when the Chilean economy experience a massive slowdown. Our data also suggest that only domestic market oriented multinationals responded to this negative shock by being more “footloose”. We also find that the presence of multinationals has a positive effect on plant survival in the early 1990s. This positive effect, however, is fully captured by productivity, once controlling for TFP in our exit regressions we do not find any further impact of multinational presence on a plant's probability of exit.