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Reconciling the Evidence on the Knowledge‐capital Model
Author(s) -
Braconier Henrik,
Norbäck PehrJohan,
Urban Dieter
Publication year - 2005
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2005.00536.x
Subject(s) - multinational corporation , economics , contrast (vision) , econometrics , production (economics) , empirical evidence , empirical research , capital (architecture) , endowment , microeconomics , positive economics , computer science , epistemology , artificial intelligence , philosophy , archaeology , finance , history
The knowledge‐capital model (KC model), described in Markusen (2002), encompasses both market size (horizontal) as well as factor endowment (vertical) explanations to why multinational production occurs. Although the KC model seems intuitively appealing the empirical support has, so far, been mixed and even confused. In this study we find strong, robust and consistent support for the KC model. In contrast to previous studies, our empirical specification is directly mapped from theory. We also use an enlarged dataset, where the data coverage is significantly improved. Our results also give estimated surfaces remarkably similar to theoretical simulations of the KC model. In addition, the results give important insights into why previous studies have yielded such diverse results.