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Horizontal and Vertical Interdependence in the Multinational Subsidiary Networks. ACES Working Paper No. 7, July 2008

Chen, Maggie X. (2008) Horizontal and Vertical Interdependence in the Multinational Subsidiary Networks. ACES Working Paper No. 7, July 2008. [Working Paper]

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    Abstract

    Existing theoretical studies have predicted that a multinational firm's location choices are interdependent across countries. Little has, however, been done to test the hypothesis at individual subsidiary level. This paper uses a detailed French multinational subsidiary dataset and estimates how a firm's decision to invest in a foreign country is not only conditional on the characteristics of that country but also the firm's existing subsidiary network Using a structural spatial econometric model, the paper finds evidence of both horizontal and vertical interdependence in multinationals' location decisions. The results indicate that while multinational firms have little incentive to duplicate their production in countries with low bilateral trade costs, they are motivated to build a vertical subsidiary network in these countries ~ especially when the countries have complementary comparative advantages.

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    Item Type: Working Paper
    Additional Information: Author indicates this is preliminary and incomplete.
    Uncontrolled Keywords: multinational firm, location decision
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > economic and financial affairs > business/private economic activity
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > American Consortium on European Union Studies > ACES Working Papers
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 14 Jan 2015 14:38
    Number of Pages: 37
    Last Modified: 14 Jan 2015 14:38
    URI: http://aei.pitt.edu/id/eprint/59058

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