The Global Agglomeration of Multinational Firms

39 Pages Posted: 15 Dec 2009 Last revised: 25 Jul 2021

See all articles by Laura Alfaro

Laura Alfaro

Harvard University

Maggie Xiaoyang Chen

George Washington University

Multiple version iconThere are 2 versions of this paper

Date Written: December 2009

Abstract

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 in comparison to the agglomeration of domestic 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 analyze the different patterns underlying the global economic geography of multinational and non-multinational firms. We present new stylized facts that suggest the offshore clusters of multinationals are not a simple reflection of domestic industrial clusters. Agglomeration economies including technology diffusion and capital-good market externality play a more important role in the offshore agglomeration of multinationals than the agglomeration of domestic firms. These findings remain robust when we explore the process of agglomeration.

Suggested Citation

Alfaro, Laura and Chen, Maggie Xiaoyang, The Global Agglomeration of Multinational Firms (December 2009). NBER Working Paper No. w15576, Available at SSRN: https://ssrn.com/abstract=1522365

Laura Alfaro (Contact Author)

Harvard University ( email )

Cambridge, MA 02138
United States

Maggie Xiaoyang Chen

George Washington University ( email )

710 21st Street NW
Washington, DC 20052
United States

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