The Global Agglomeration of Multinational Firms
Harvard University - Business, Government and the International Economy Unit
Maggie Xiaoyang Chen
George Washington University
October 22, 2012
Harvard Business School BGIE Unit Working Paper No. 10-043
The explosion of multinational activities in recent decades is rapidly transforming the global landscape of industrial production. But are the emerging clusters of multinational production the rule or the exception? What drives the offshore agglomeration of multinational firms? Using a unique worldwide plant-level dataset that reports detailed location, ownership, and operation information for plants in over 100 countries, we construct a spatially continuous index of agglomeration and investigate the patterns and determinants underlying the global economic geography of multinational firms. Our analysis shows that the emerging offshore clusters of multinationals are not a simple reflection of domestic industrial clusters. Location fundamentals including market access and comparative advantage and under-emphasized agglomeration economies including capital-good market externality and technology diffusion play a particularly important role in multinationals’ offshore agglomeration.
Number of Pages in PDF File: 43
Keywords: multinational firm, agglomeration, location fundamentals, agglomeration economies
JEL Classification: F2, D2, R1working papers series
Date posted: December 18, 2009 ; Last revised: November 28, 2012
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