Discriminating Among Alternative Theories of the Multinational Enterprise

Discriminating Among Alternative Theories of the Multinational Enterprise

Published Jan 1999

Authors

J.R. Markusen, K.E. Maskus

Publisher

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Recent theoretical developments have incorporated endogenous multinational firms into the general-equilibrium model of trade. One simple taxonomy separates the theory into vertical' models in which firms geographically separate activities by stages of production and horizontal' models of multi-plant firms which duplicate roughly the same activities in many countries. Authors refer to a hybrid of these two as the 'knowledge capital model'.

This paper nests these three models within an unrestricted model. Econometric tests give strong support to the horizontal model and overwhelming reject the vertical model. [author]

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