scholarly journals Information Frictions, Investment Promotion, and Multinational Production: Firm-Level Evidence

2021 ◽  
Author(s):  
Jerónimo Carballo ◽  
Ignacio Marra Artiñano ◽  
Christian Volpe Martincus
Keyword(s):  
Information Frictions ◽  
Firm Level ◽  
Investment Promotion ◽  
Multinational Production

Making the Invisible Visible: Investment Promotion and Multinational Production in Latin America and the Caribbean

2021 ◽  
Author(s):  
Christian Volpe Martincus ◽  
Ignacio Marra de Artiñano ◽  
Monika Sztajerowska ◽  
Jerónimo Carballo
Keyword(s):  
Multinational Firms ◽  
Cost Effective ◽  
Firm Level ◽  
Information Barriers ◽  
Investment Promotion ◽  
Promotion Policies ◽  
Level Data ◽  
Multinational Production ◽  
The Impact ◽  
The Invisible

Firms seeking to invest abroad must still confront important information barriers. As a consequence, a given country may provide suitable conditions for investment but remain invisible to multinational firms. Nearly all countries in the world have established investment promotion agencies (IPAs) to address these information barriers and put themselves on investors maps. Although IPAs are ubiquitous, the existing literature on the impacts of their activities is limited and only provides a view from the top, thus leaving governments without crucial inputs for designing and guiding their policy actions. Making the Invisible Visible fills in these knowledge gaps by zooming in on the effects of investment promotion policies and the mechanisms and channels thereof. To do so, it draws on the results of a highly detailed institutional survey of more than 50 IPAs and unique firm-level data on both the worldwide location of multinational firms foreign affiliates and IPA assistance for several LAC countries. Based on the results of impact evaluations using this novel micro data, the report presents robust new evidence on whether and how investment promotion works, what works in investment promotion, and when investment promotion works. In particular, it concludes that: (i) investment promotion has been (cost-)effective in attracting multinational firms and increasing LAC countries participation in multinational production; (ii) how IPAs are organized, what they do, and how they do it all influence these effects; (iii) the impact of IPA assistance has been greater when it consisted of specialized information services and was given to firms headquartered in countries and operating in sectors in which information barriers are more prominent. These findings can help countries in the region make better, more informed policy and operational decisions to take advantage of the opportunities that the current global context could create. They may thereby create a solid basis for long-term growth and sustainable development.

Selection and Market Reallocation: Productivity Gains from Multinational Production

2018 ◽  
Vol 10 (2) ◽  
pp. 1-38 ◽  
Author(s):  
Laura Alfaro ◽  
Maggie X. Chen
Keyword(s):  
Economic Research ◽  
Policy Debate ◽  
Aggregate Productivity ◽  
Productivity Improvement ◽  
Firm Level ◽  
Domestic Firms ◽  
Multinational Production ◽  
Substantial Bias ◽  
Productivity Gains ◽  
Research And Policy

Assessing productivity gains from multinational production has been a vital topic of economic research and policy debate. Positive productivity gains are often attributed to productivity spillovers; however, an alternative, much less emphasized channel is selection and market reallocation, whereby competition leads to factor and revenue reallocation within and between domestic firms and exits of the least productive firms. We investigate the roles of these different mechanisms in determining aggregate-productivity gains using a unifying framework that explores the mechanisms' distinct predictions on the distributions of domestic firms: within-firm productivity improvement shifts rightward or reshapes the productivity distribution, while selection and market reallocation move the revenue and employment distributions leftward and raise left truncations. Using a rich cross-country firm-level panel dataset, we find significant evidence of both mechanisms and effects of competition in product, technology, and labor space. However, selection and market reallocation account for the majority of aggregate-productivity gains, suggesting ignoring this channel could lead to substantial bias in understanding the nature of productivity gains from multinational production. (JEL D22, D24, F14, F23, G32, O47)

scholarly journals Global Production with Export Platforms*

2016 ◽  
Vol 132 (1) ◽  
pp. 157-209 ◽  
Author(s):  
Felix Tintelnot
Keyword(s):  
General Equilibrium ◽  
Host Country ◽  
Foreign Investment ◽  
Multinational Firms ◽  
Multinational Enterprise ◽  
Fixed Costs ◽  
Firm Level ◽  
Level Data ◽  
Multinational Production ◽  
Foreign Affiliates

Abstract Most international commerce is carried out by multinational firms, which use their foreign affiliates both to serve the market of the host country and to export to other markets outside the host country. In this article, I examine the determinants of multinational firms’ location and production decisions and the welfare implications of multinational production. The few existing quantitative general equilibrium models that incorporate multinational firms achieve tractability by assuming away export platforms—that is, they do not allow foreign affiliates of multinationals to export—or by ignoring fixed costs associated with foreign investment. I develop a quantifiable multicountry general equilibrium model, which tractably handles multinational firms that engage in export platform sales and that face fixed costs of foreign investment. I first estimate the model using German firm-level data to uncover the size and nature of costs of multinational enterprise and show that the fixed costs of foreign investment are large. Second, I calibrate the model to data on trade and multinational production for twelve European and North American countries. Counterfactual analysis reveals that multinationals play an important role in transmitting technological improvements to foreign countries and that the pending Canada-EU trade and investment agreement could divert a sizable fraction of the production of EU multinationals from the U.S. to Canada.

Globalizing Innovation

2018 ◽  
Author(s):  
Patrick J. W. Egan
Keyword(s):  
Host Country ◽  
Emerging Economies ◽  
Large Scale ◽  
Foreign Firms ◽  
Strong Impact ◽  
Host Countries ◽  
Investment Promotion ◽  
Country Level ◽  
Sectoral Differences ◽  
Multinational Production

This book considers patterns of inward foreign investment in emerging economies. Foreign Direct Investment (FDI) has long been recognized as a potential source of developmental benefits for host countries, but existing studies have not always considered the heterogeneity of FDI or the types of activities pursued by multinationals in peripheral markets. This book examines the uneven spread of innovation-intensive investment to emerging economies, and asks questions about its determinants. Through use of large scale firm surveys, firm and country level data, and case studies, this book demonstrates that host country institutions and policies have a strong impact on the likelihood and intensity of local innovation by multinationals. This book unpacks the multifaceted concept of innovation, and proposes multiple measures including R&D spending, patents, and other indicators. The analysis also considers sectoral differences in innovation patterns, and how innovative foreign firms do or do not become embedded in host economies. This book modifies comparative institutional analysis for an era of multinational production, and has important implications for industrial policy and investment promotion practices. Host country institutions, which serve as intermediaries between foreign forms and domestic markets, have an important role to play in reducing the risk inherent in decentralized innovation. This book therefore contributes to diverse literatures on the political economy of FDI, development, and international business studies.

How Effective is Investment Promotion?: Firm-Level Evidence

2020 ◽  
Author(s):  
Christian Volpe Martincus ◽  
Jerónimo Carballo ◽  
Ignacio Marra de Artiñano ◽  
Juan Blyde
Keyword(s):  
Firm Level ◽  
Investment Promotion

The Impact of ISO 14001 environmental standards on exports

2021 ◽  
Author(s):  
Juan S. Blyde
Keyword(s):  
Export Performance ◽  
International Standards ◽  
Iso 14001 ◽  
Information Frictions ◽  
Firm Level ◽  
Environmental Certification ◽  
Level Data ◽  
Iso 14001 Certification ◽  
The Impact

Analyses that examine the role of international standards on export performance has been concentrated on quality certifications. Very little is known about the impact of environmental certifications on exports. In this paper we employ firm-level data from Ecuador to assess the impact of the ISO 14001 environmental certification on export outcomes. The results show that holding an ISO 14001 increases the likelihood of becoming an exporter by 0.31 percentage points (equivalent to 4%), and that this positive effect is concentrated among large firms. We did not find evidence that the environmental certification has a causal impact on the level or the growth rate of exports. Consequently, the results suggest that the ISO 14001 certification is most useful in reducing information frictions, allowing firms to initiate export transactions.

Marshallian Cross: An Alternative Justification and Related Issues

2013 ◽  
pp. 108-120 ◽  
Author(s):  
L. Grebnev
Keyword(s):  
Alternative Treatment ◽  
Supply And Demand ◽  
Firm Level ◽  
Economics Courses ◽  
Introductory Economics

The paper provides a justification of the laws of supply and demand using the concept of a marginal firm (technology) for the case of perfect competition.The ideological factor of excessive attention to the analysis of marginal parameters at the firm level in the introductory economics courses is discussed. The author connects these issues to the ideas of J. B. Clark and gives an alternative treatment of exploitation.

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