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Technological Constraints, Firm Heterogeneity, and Location Choice of Multinational Enterprises
Author(s) -
Nishiyama Hiroyuki,
Yamaguchi Masao
Publication year - 2013
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/roie.12085
Subject(s) - multinational corporation , foreign direct investment , productivity , developing country , business , economics , international trade , international economics , industrial organization , economic growth , macroeconomics , finance
This paper aims to examine the relationship between the location choices of multinational enterprises and their productivity considering the N orth– S outh differences in regard to technological constraints. We find that home firms with the highest level of productivity choose to undertake foreign direct investment ( FDI ) in the developed countries and they choose to export to, rather than do FDI in, developing countries. This result explains why not many high tech industries exist in developing countries. Using Japanese firm level data, we also confirm that Japanese high tech firms tend to undertake FDI in developed countries, but hesitate to invest in developing countries empirically.