Depending on one's point of view, multinational enterprises are either the heroes or the villains of the globalized economy. Governments compete fiercely for foreign direct investment by such companies, but complain when firms go global and move their activities elsewhere. Multinationals are seen by some as threats to national identities and wealth and are accused of riding roughshod over national laws and of exploiting cheap labor. However, the debate on these companies and foreign direct investment is rarely grounded on sound economic arguments. This book brings clarity to the debate. With the contribution of other leading experts, Giorgio Barba Navaretti and Anthony Venables assess the determinants of multinationals' actions, investigating why their activity has expanded so rapidly, and why some countries have seen more such activity than others. They analyze their effects on countries that are recipients of inward investments, and on those countries that see multinational firms moving jobs abroad. The arguments are made using modern advances in economic analysis, a case study, and by drawing on the extensive empirical literature that assesses the determinants and consequences of activity by multinationals. The treatment is rigorous, yet accessible to all readers with a background in economics, whether students or professionals. Drawing out policy implications, the authors conclude that multinational enterprises are generally a force for the promotion of prosperity in the world economy.

• Cover Page
• Half-title Page
• Title Page
• Copyright Page
• Contents
• Preface
• List of Contributors
• 1. Facts and Issues
  • 1.1 Multinationals: What Are They and How Are They Measured?
  • 1.2 The Facts: Empirical Overview
  • 1.3 The Issues
  • 1.4 Guide to the Book
    • Statistical Appendix
• 2. The Multinational Enterprise: an Overview of Theory and Empirical Findings
  • 2.1 National and International Production
  • 2.2 Internalization and the Boundary of the Firm
  • 2.3 Effects of FDI
  • 2.4 Conclusions
• 3. Horizontal Foreign Direct Investment: Product Market Access
  • 3.1 A Model
  • 3.2 National versus Multinational Supply
  • 3.3 Demand and Firm Behaviour
  • 3.4 The Effect of FDI on the Host Economy
  • 3.5 Extensions
  • 3.6 Conclusions
    • Appendix 3.1. Parameters Underlying Figures
    • Appendix 3.2. Section 3.5.1
• 4. Vertical Foreign Direct Investment: Input Costs and Factor Prices
  • 4.1 Cost-Minimizing Locations
  • 4.2 Fragmentation and Factor Prices
  • 4.3 Fragmentation in General Equilibrium
  • 4.4 Factor Price Convergence?
  • 4.5 Conclusions
    • Appendix 4.1. Parameter Values in Figures 4.1 and 4.2
    • Appendix 4.2. Parameter Values in Figure 4.6
    • Appendix 4.3. Components Labour Intensive
• 5. Multinationals: the Firm and the Market
  • 5.1 An Analytical Framework
  • 5.2 Hold-up
  • 5.3 Hold-up in Industry Equilibrium
  • 5.4 Dissipation of Intangible Assets
  • 5.5 Agency Costs
  • 5.6 Conclusions
    • Appendix
• 6. Determinants of FDI: the Evidence
  • 6.1 A General Framework
  • 6.2 Industry and Firm Determinants of FDI
  • 6.3 Country Determinants of FDI
  • 6.4 The Relative Importance of Horizontal versus Vertical FDI
  • 6.5 Other Factors Affecting the Location of FDI
  • 6.6 Concluding Remarks
• 7. Host Country Effects: Conceptual Framework and the Evidence
  • 7.1 Aggregate Effects of FDI on Economic Growth: Cross-Country Evidence
  • 7.2 Firm Effects: Conceptual Framework
  • 7.3 Productivity
  • 7.4 Factor Markets
  • 7.5 Employment Volatility
  • 7.6 Multinationals and Local Firms
  • 7.7 Conclusions
    • Appendix
• 8. FDI and the Host Economy: a Case Study of Ireland
  • 8.1 Ireland’s Success in Attracting FDI
  • 8.2 Characteristics of FDI Inflows to Ireland
  • 8.3 FDI and the Development of the Irish Economy
  • 8.4 Concluding Comments
• 9. Home Country Effects of Foreign Direct Investment
  • 9.1 What are the Effects? Setting the Issues
  • 9.2 Foreign Production and Domestic Activities: Substitutes or Complements?
  • 9.3 Skill Intensity
  • 9.4 Technological Sourcing
  • 9.5 Effects on Productivity: Comparing MNEs and National Firms
  • 9.6 Conclusions
    • Appendix. Derivation of Empirically Testable Demands for Relatively Skilled Labour
• 10. Policy Implications and Effects
  • 10.1 The Impact of FDI on Economic Policy
  • 10.2 FDI Incentives
  • 10.3 Policy Competition and Policy Coordination
  • 10.4 International Governance of Investment Regimes
  • 10.5 Concluding Remarks
• 11. Conclusions
• Appendix A Statistical Definitions and Databases on Foreign Direct Investment and the Activities of Multinationals
  • A.1 International Statistics on Foreign Direct Investment
  • A.2 Financial and Operating Data on Multinational Firms
• Glossary
• References
• Index