Table of contents for Foreign direct investment and the multinational enterprise / edited by Steven Brakman and Harry Garretsen.

Bibliographic record and links to related information available from the Library of Congress catalog.

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Contents
1 Foreign Direct Investment and the Multinational Enterprise: An
Introduction 1
Steven Brakman and Harry Garretsen
1.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Part I: Theory . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.3 Part II: Empirics . . . . . . . . . . . . . . . . . . . . . . . . 11
2 Trade Costs and Foreign Direct Investment 17
J. Peter Neary
2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.2 The Proximity-Concentration Trade-Off . . . . . . . . . . . 19
2.3 Vertical versus Horizontal FDI . . . . . . . . . . . . . . . . 26
2.4 Export-Platform FDI . . . . . . . . . . . . . . . . . . . . . 31
2.5 Cross-Border Mergers and Acquisitions . . . . . . . . . . . 35
2.6 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3 Investment Liberalization and the Geography of Firm Location 59
iii
Anders N. Hoffman and James R. Markusen
3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . 59
3.2 Model Structure . . . . . . . . . . . . . . . . . . . . . . . . 64
3.3 Effects of Investment Liberalization . . . . . . . . . . . . . 73
3.4 Some Relevant Data . . . . . . . . . . . . . . . . . . . . . . 81
3.5 Summary and Conclusions . . . . . . . . . . . . . . . . . . 85
4 Outsourcing, Contracts and Innovation Networks 95
Alireza Naghavi and Gianmarco Ottaviano
4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . 95
4.2 A Model of Product Innovation . . . . . . . . . . . . . . . . 102
4.2.1 Demand . . . . . . . . . . . . . . . . . . . . . . . . 102
4.2.2 Supply . . . . . . . . . . . . . . . . . . . . . . . . 104
4.3 Organization and Product Variety . . . . . . . . . . . . . . . 107
4.3.1 Production . . . . . . . . . . . . . . . . . . . . . . 107
4.3.2 Innovation . . . . . . . . . . . . . . . . . . . . . . 110
4.3.3 Equilibrium . . . . . . . . . . . . . . . . . . . . . . 112
4.3.4 Comparative Statics . . . . . . . . . . . . . . . . . 116
4.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . 121
5 Agglomeration and Government Spending 129
Steven Brakman, Harry Garretsen and Charles van Marrewijk
5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . 129
5.2 Stylized facts about taxation and public spending in the EU . 134
iv
5.3 The Model . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
5.4 Analysis of the symmetric equilibrium for a given level of
public goods . . . . . . . . . . . . . . . . . . . . . . . . . . 144
5.5 Break analysis for a given level of public goods . . . . . . . 149
5.6 Simulation results . . . . . . . . . . . . . . . . . . . . . . . 152
5.7 Summary and conclusions . . . . . . . . . . . . . . . . . . 155
6 Transfer Pricing and Enforcement Policy in Oligopolistic Markets
169
Oscar Amerighi
6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . 169
6.2 The model . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
6.3 Transfer pricing and quantity decisions . . . . . . . . . . . . 181
6.3.1 Equilibrium transfer price . . . . . . . . . . . . . . 182
6.3.2 Equilibrium home sales and exports . . . . . . . . . 184
6.4 Tax competition . . . . . . . . . . . . . . . . . . . . . . . . 189
6.4.1 Symmetric tax rates and enforcement policies . . . . 191
6.4.2 Effects of economic integration . . . . . . . . . . . 194
6.5 Enforcement policy competition . . . . . . . . . . . . . . . 200
6.6 Concluding remarks . . . . . . . . . . . . . . . . . . . . . . 204
7 Gains from Trade and Fragmentation 229
Alan V. Deardorff
7.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . 229
v
7.2 Lessons from the Gains from Trade . . . . . . . . . . . . . 231
7.3 Can Fragmentation Hurt a Country? . . . . . . . . . . . . . 234
7.4 Can Fragmentation Hurt Groups within a Country? . . . . . 238
7.5 Can Fragmentation Hurt the World? . . . . . . . . . . . . . 240
7.6 Should We Care about the World ? . . . . . . . . . . . . . . 245
7.7 Conclusion? . . . . . . . . . . . . . . . . . . . . . . . . . . 249
8 Spacey Parents: Spatial Autoregressive Patterns in Inbound FDI255
Bruce A. Blonigen, Ronald B. Davies, Helen T. Naughton, and Glen R. Waddell
8.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . 255
8.2 A Simple Model of the Multinational Firm . . . . . . . . . . 258
8.3 Empirical Methodology and Data . . . . . . . . . . . . . . . 264
8.3.1 Empirical Specification . . . . . . . . . . . . . . . . 264
8.3.2 Data . . . . . . . . . . . . . . . . . . . . . . . . . . 269
8.4 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272
8.4.1 OECD Results . . . . . . . . . . . . . . . . . . . . 272
8.4.2 Robustness to Alternative Weighting Schemes . . . . 274
8.4.3 European Results . . . . . . . . . . . . . . . . . . . 277
8.5 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . 280
9 Do Italian firms improve their performance at home by investing
abroad? 291
Giorgio Barba Navaretti and Davide Castellani
9.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . 291
vi
9.2 Analysing the performance of investing firms: the issue . . . 295
9.2.1 Analytical issues . . . . . . . . . . . . . . . . . . . 295
9.2.2 The empirical setting . . . . . . . . . . . . . . . . . 298
9.3 The evaluation problem: propensity score matching and differencein-
difference estimators . . . . . . . . . . . . . . . . . . . . 302
9.4 Data and description of the sample . . . . . . . . . . . . . . 306
9.5 Construction of the counterfactual . . . . . . . . . . . . . . 309
9.6 The effects of investing abroad: results . . . . . . . . . . . . 313
9.7 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . 315
10 Is Human Capital Losing from Outsourcing? Evidence for Austria
and Poland 325
Andzelika Lorentowicz, Dalia Marin, and Alexander Raubold
10.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . 325
10.2 The Framework . . . . . . . . . . . . . . . . . . . . . . . . 330
10.3 The Empirical Model . . . . . . . . . . . . . . . . . . . . . 333
10.4 Outsourcing in Austria . . . . . . . . . . . . . . . . . . . . 335
10.4.1 Data and Variables . . . . . . . . . . . . . . . . . . 336
10.4.2 Empirical Results . . . . . . . . . . . . . . . . . . . 337
10.5 Multinational Outsourcing to Poland . . . . . . . . . . . . . 342
10.5.1 Data and Variables . . . . . . . . . . . . . . . . . . 342
10.5.2 Empirical Results . . . . . . . . . . . . . . . . . . . 344
10.5.3 Robustness . . . . . . . . . . . . . . . . . . . . . . 347
vii
10.6 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . 349
10.6.1 Data . . . . . . . . . . . . . . . . . . . . . . . . . . 350
10.6.2 Tables . . . . . . . . . . . . . . . . . . . . . . . . . 353
11 Is it strategic to attract the service activities of multinational
firms ? Some empirical evidence. 361
Fabrice Defever
11.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . 361
11.2 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365
11.2.1 Description of the database . . . . . . . . . . . . . . 365
11.2.2 The five functions considered . . . . . . . . . . . . 366
11.2.3 Job creation by multinational firms . . . . . . . . . 367
11.3 Econometric Model . . . . . . . . . . . . . . . . . . . . . . 370
11.4 Dependent and independent variable . . . . . . . . . . . . . 372
11.4.1 Construction of the dependent variable . . . . . . . 372
11.4.2 The independent variables . . . . . . . . . . . . . . 373
11.5 Econometric test . . . . . . . . . . . . . . . . . . . . . . . 374
11.6 Implications for policy makers . . . . . . . . . . . . . . . . 377
viii

Library of Congress Subject Headings for this publication:

Investments, Foreign.
International business enterprises.