Working Paper No. 464

Multinationals without Advantages

Published: August 1996Pages: 21Keywords: TRANSNATIONAL CORPORATIONS; INVESTMENTSJEL-codes: F23; F21

Multinationals without Advantages Massimo Motta


We propose a simple model to analyze the widespread idea that a necessary condition for firms to make foreign direct investments is that they have firm-specific advantages with respect to host country firms. We show that no such advantages are necessary to become multinationals. Further, firms might be induced to invest abroad to acquire new advantages, rather than exploiting existing ones. For this reason, foreign direct investment might occur even in the absence of exporting costs and lower production costs in the host country. Firms endowed with lower quality might make direct investments to benefit from technological spillovers which arise when manufacturing subsidiaries are close, whereas high quality firms might prefer not to invest abroad to avoid dissipation of their advantages.

An Agenda for Europe

Institutional Reform for Innovation and Entrepreneurship

Omslag 2017 Institutional Reform for Innovation and Entrepreneurship.jpg

The authors of this book, Niklas Elert, Magnus Henrekson and Mikael Stenkula, advise the economies of the European Union to become more entrepreneurial in promoting innovation and economic growth. The authors propose a reform strategy with respect to several aspects to achieve this goal.

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