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- Title
Power in the multinational corporation in industry equilibrium.
- Authors
Marin, Dalia; Verdier, Thierry
- Abstract
Recent theories of the multinational corporation introduce the property rights model of the firm and examine whether to integrate or outsource firm activities locally or to a foreign country. This paper focuses instead on the internal organization of the multinational corporation by examining the power allocation between headquarters and subsidiaries. We provide a framework to analyse the interaction between the decision to serve the local market by exporting or FDI, market access and the optimal mode of organization of the multinational corporation. We find that subsidiary managers are given decision power to run the firm at intermediate levels of host country competition. We then provide comparative statics on the optimal organization of the multinational corporation for changes in fixed FDI entry costs, trade costs, as well as changes in information technology.
- Subjects
INTERNATIONAL business enterprises; PROPERTY rights; ECONOMIC models; CONTRACTING out; INDUSTRIAL management; SUBSIDIARY corporations
- Publication
Economic Theory, 2009, Vol 38, Issue 3, p437
- ISSN
0938-2259
- Publication type
Article
- DOI
10.1007/s00199-007-0327-3