Location of Production

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Presentation transcript:

Location of Production Multinationals and the Location of Production Project Link United Nations April 27, 2019 April 27, 2019

April 27, 2019

April 27, 2019

Resource Flows to Developing Countries April 27, 2019

Netting Out M&A Activity: Developing Country FDI has Grown Steadily April 27, 2019

Winners and Losers from FDI Inflows in 2001 April 27, 2019

Who Received FDI in 2001? April 27, 2019

Corporate Priorities: FDI in 2002 Most Favoured Destinations as a Percentage of MNE Responses April 27, 2019

Determinants of FDI, Location of Production and Trade Political Expropriation Contracting Environment April 27, 2019

1. Breaking Down the Value Chain April 27, 2019

FDI and the Propagation of International Shocks April 27, 2019

FDI and Deflation April 27, 2019

2. Asset Specificity and Relationship-Specific Investments Why is FDI so intense in just a handful of industries? April 27, 2019

3. Knowledge Creation and Control Who creates Knowledge? Who Controls Knowledge? April 27, 2019

Sony’s Flat-Screen Cathode Ray Tube (CRT) April 27, 2019

FDI, Trade and IPR Regimes April 27, 2019

4. Rent-Seeking Institutions Political Expropriations Legal / Contractual Environment April 27, 2019

FDI, Trade and IPR Regimes April 27, 2019

Putting a Lid on Rent-Seeking Behaviour Long-Run Growth (1972-2000) (Skilled Sector Tariffs) – (Unskilled Sector Tariffs) April 27, 2019

Determinants of FDI, Location of Production and Trade Political Expropriation Contracting Environment April 27, 2019

Virtually all of international trade in manufactures and services is done via multinationals. 1/3 is done within a firm, 1/3 is done at arm’s length in which both sides are MNCs and 1/3 is done at arm’s length in which one side is an MNC. In short, the international location of production is determined by FDI. April 27, 2019

In the 1990s FDI grew dramatically In the 1990s FDI grew dramatically. The usual explanation is that it was driven by (in order of importance) technological forces related to the ability to direct a firm from a distance (ICT), the M&A wave which reflected changing managerial views about economies of scope versus core competence, FDI liberalization in developing countries, falling transportation costs, and trade liberalization. April 27, 2019

After growing since 1991, FDI contracted substantially in 2001. Causes (in order of importance): Bursting of the bubble with its implications for equity finances, especially M&A activity and the consolidation of core competences. Slowing of economic activity in the major industrial economies. Sept. 11, war, deflation, SARS April 27, 2019