Optimal integration strategies for the multinational firm

Gene M. Grossman, Elhanan Helpman, Adam Szeidl

Research output: Contribution to journalArticlepeer-review

192 Scopus citations

Abstract

We examine integration strategies of multinational firms that face a rich array of choices of international organization. Each firm must provide headquarter services from its home country, but can produce its intermediate inputs and conduct assembly operations in one or more of three locations. We study the equilibrium choices of firms that differ in productivity levels, focusing on the role that industry characteristics such as the fixed costs of foreign subsidiaries, the cost of transporting intermediate and final goods, and the regional composition of the consumer market play in determining the optimal integration strategies.

Original languageEnglish (US)
Pages (from-to)216-238
Number of pages23
JournalJournal of International Economics
Volume70
Issue number1
DOIs
StatePublished - Sep 2006

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Keywords

  • Direct foreign investment
  • Intra-firm trade
  • Multinational corporations
  • Vertical integration

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