Dissipation of Knowledge and the Boundaries of the Multinational Enterprise

This paper provides a theoretical formalisation of the joint-venture contract, as an alternative to Foreign Direct Investment (FDI), within a Dissipation of Intangible Assets framework. In a two-period model, we discuss how the threat of knowledge spillover shapes the boundaries of a Multinational Enterprise. Similarly to the theoretical findings on the FDI-licensing trade off, we show that the integrated solution is more likely to emerge when know-how easily spills over – i.e. when firms are endowed with more Intangible Assets or they belong to high tech industries. Probit estimates, from a new firm-level dataset, show that Japanese manufacturing operations in Europe are in line with these predictions.


Issue Date:
2005
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/12077
Total Pages:
40
Series Statement:
KTHC Nota di Lavoro 121.2005




 Record created 2017-04-01, last modified 2017-08-23

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