International Trade, Multinational Activity, and Corporate Finance

Annual Review of Economics, Vol. 7, 2015

33 Pages Posted: 23 Oct 2014

See all articles by C. Fritz Foley

C. Fritz Foley

Harvard Business School; National Bureau of Economic Research (NBER)

Kalina Manova

University College London - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: October 21, 2014

Abstract

An emerging new literature brings unique ideas from corporate finance to the study of international trade and investment. Insights about differences in the development of financial institutions across countries, the role of financial constraints, and the use of internal capital markets are proving central in understanding international economics. The ability to access financial capital to pay fixed and variable costs affects choices firms make regarding export entry and operations, and, as a consequence, influence aggregate trade patterns. Financial frictions and the use of internal capital markets shape decisions that multinationals make regarding production locations, integration, and corporate governance. This article surveys this recent research with the goal of highlighting the main themes it explores, the key results it establishes, and the leading open questions it raises.

Keywords: international trade, multinational companies, foreign direct investment, financial frictions

JEL Classification: F10, F20, F23, F36, G3

Suggested Citation

Foley, C. Fritz and Manova, Kalina B., International Trade, Multinational Activity, and Corporate Finance (October 21, 2014). Annual Review of Economics, Vol. 7, 2015. Available at SSRN: https://ssrn.com/abstract=2512980

C. Fritz Foley

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States
617-495-6375 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Kalina B. Manova (Contact Author)

University College London - Department of Economics ( email )

Drayton House, 30 Gordon Street
30 Gordon Street
London, WC1H 0AX
United Kingdom

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