Global Fixed Capital Investment by Multinational Firms

46 Pages Posted: 28 Jan 2013

See all articles by René Belderbos

René Belderbos

University of Leuven (KUL) - Department of Managerial Economics, Strategy and Innovation; Maastricht University - Department of Organization & Strategy

Kyoji Fukao

Hitotsubashi University - Institute of Economic Research

Keiko Ito

Senshu University - School of Economics

Wilko H. Letterie

Maastricht School of Business and Economics; Maastricht University

Date Written: 2012

Abstract

We develop and test a model of the simultaneous determination of global gross fixed capital investments by multinational firms. We integrate a model of multi-product firms choosing optimal manufacturing locations with a model of dynamic investment optimization. Firms adjust capital stocks in each location in accordance withe the expected marginal profitability of capital. Analysis of 1504 fixed capital investment decisions by Japanese multinational firms confirms the prediction that investment is not only determined by total factor productivity, effective demand, and wage levels in the host country, but also by wage levels in other countries in which the firm operates.

Keywords: multinational firms, foreign direct investment, fixed capital investment

JEL Classification: D24, D92, F23

Suggested Citation

Belderbos, Rene and Fukao, Kyoji and Ito, Keiko and Letterie, Wilko H., Global Fixed Capital Investment by Multinational Firms (2012). Available at SSRN: https://ssrn.com/abstract=2200829 or http://dx.doi.org/10.2139/ssrn.2200829

Rene Belderbos (Contact Author)

University of Leuven (KUL) - Department of Managerial Economics, Strategy and Innovation ( email )

Naamsestraat 69
Leuven, B-3000
Belgium
+32 16 32 6912 (Phone)
+32 16 32 6732 (Fax)

Maastricht University - Department of Organization & Strategy ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

Kyoji Fukao

Hitotsubashi University - Institute of Economic Research ( email )

2-1 Naka Kunitachi-shi
Tokyo 186-8306
Japan

Keiko Ito

Senshu University - School of Economics ( email )

Kanagawa 214-8580
Japan

Wilko H. Letterie

Maastricht School of Business and Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
31-43-3883645 (Phone)
31-43-3213137 (Fax)

Maastricht University

P.O. Box 616
Maastricht, 6200MD
Netherlands

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