Organization of Multinational Activities and Ownership Structure

36 Pages Posted: 19 Apr 2006

See all articles by Christian Mugele

Christian Mugele

Munich Graduate School of Economics

Monika Schnitzer

University of Munich - Department of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2006

Abstract

We develop a model in which multinational investors decide about the modes of organization, the locations of production, and the markets to be served. Foreign investments are driven by market-seeking and cost-reducing motives. We further assume that investors face costs of control that vary among sectors and increase in distance. The results show that (i) production intensive sectors are more likely to operate a foreign business independent of the investment motive, (ii) that distance may have a non-monotonous effect on the likelihood of horizontal investments, and (iii) that globalization, if understood as reducing distance, leads to more integration.

Keywords: Multinational firms, Joint ventures, Distance, Technology spillovers, Ownership structure

JEL Classification: F23, L24, L22, L23, D23

Suggested Citation

Mugele, Christian and Schnitzer, Monika, Organization of Multinational Activities and Ownership Structure (February 2006). Available at SSRN: https://ssrn.com/abstract=894933 or http://dx.doi.org/10.2139/ssrn.894933

Christian Mugele

Munich Graduate School of Economics ( email )

Kaulbachstrasse 45
München, 80539
Germany

HOME PAGE: http://www.mgse.vwl.lmu.de

Monika Schnitzer (Contact Author)

University of Munich - Department of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany
+49 89 2180 2217 (Phone)
+49 89 2180 2767 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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