Multinational Firms, Technology Diffusion and Trade

41 Pages Posted: 19 Jun 2004 Last revised: 29 Jun 2012

See all articles by Wilfred J. Ethier

Wilfred J. Ethier

University of Pennsylvania - Department of Economics

James R. Markusen

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

Date Written: August 1991

Abstract

Empirical evidence indicates a close association between multinational firms and knowledge capital, a public good within the firm. We model a firm which wishes to exploit its knowledge capital abroad, but whose workers learn all the knowledge necessary for production and can defect and produce the good themselves. The home firm must then choose between costly exporting and the possible dissipation of its knowledge capital by producing abroad. The paper examines the choice between exporting, licensing, and acquiring a subsidiary in this environment. We analyze the cost and technology parameters that support the alternative modes of serving the foreign market, and we describe the international equilibrium that jointly determines the pattern of specialization and the market mode.

Suggested Citation

Ethier, Wilfred J. and Markusen, James R., Multinational Firms, Technology Diffusion and Trade (August 1991). NBER Working Paper No. w3825. Available at SSRN: https://ssrn.com/abstract=226745

Wilfred J. Ethier (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898 5105 (Phone)
215-573-4217 (Fax)

James R. Markusen

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309
United States
303-492-0748 (Phone)
303-492-8960 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
United States

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