Optimal Integration Strategies for the Multinational Firm

41 Pages Posted: 9 Apr 2004

See all articles by Gene M. Grossman

Gene M. Grossman

Princeton University - Princeton School of Public and International Affairs; Princeton University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Elhanan Helpman

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Adam Szeidl

Central European University

Multiple version iconThere are 3 versions of this paper

Date Written: December 2003

Abstract

We examine integration strategies of multinational firms that face a rich array of choices of international organization. Each firm in an industry must provide headquarter services from its home country, produce intermediate inputs, and assemble the intermediate goods into final products. Both production of intermediate goods and assembly can be performed at home, in another "Northern" country, in the low-wage "South," or in several of these locations. We study the equilibrium choices of firms that differ in productivity (and thus size), focusing on the role of industry characteristics such as the fixed costs of foreign subsidiaries, the cost of transporting intermediate and final goods,and the share of the consumer market that resides in the South in determining optimal integration strategies.

JEL Classification: F23, F12, L22

Suggested Citation

Grossman, Gene M. and Helpman, Elhanan and Szeidl, Adam, Optimal Integration Strategies for the Multinational Firm (December 2003). Available at SSRN: https://ssrn.com/abstract=525002 or http://dx.doi.org/10.2139/ssrn.525002

Gene M. Grossman

Princeton University - Princeton School of Public and International Affairs ( email )

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Princeton University - Department of Economics ( email )

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CESifo (Center for Economic Studies and Ifo Institute) ( email )

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Centre for Economic Policy Research (CEPR)

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National Bureau of Economic Research (NBER)

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Elhanan Helpman (Contact Author)

Harvard University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

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Adam Szeidl

Central European University ( email )

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Hungary
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