Multinational Firms and the Theory of International Trade [Paperback]

James R. Markusen (Author)

Book Description

Publication Date: August 20, 2004

Despite the great importance of multinational firms in international economics, theoretical and empirical research on these firms has generally been conducted separately from that on international trade. In this book, James Markusen provides a comprehensive integration of the two fields. Drawing on twenty years of research, he focuses on the interaction of scale economies, trade costs, factor endowments, and imperfect competition. He analyzes decisions about whether to build or acquire a foreign plant separately from decisions about where to raise the financing.Markusen begins with the simplest possible partial equilibrium models and works systematically toward a full-fledged general equilibrium model with both horizontal and vertical foreign direct investment. He offers empirical tests of hypotheses derived from the theoretical models. The notation is unified throughout, distinctions between models are explained with thoroughly explained derivations, and numerous graphs support the analysis.

Editorial Reviews

Review

"Markusen has penned a dream book on multinationals for students and specialists alike. The questions are essential, the results rich, and the exposition exquisite." Donald R. Davis , Professor of Economics, Columbia University

"The book will be of tremendous interest to professionals in the field..." Civil Engineering

"Multinational enterprises account for one of the fastest growing segments of world trade. Markusen provides a comprehensive theoretical framework to explain the role that multinationals play in the process of globalization. This book is a must read for anyone interested in the field."--Gordon Hanson, University of California, San Diego

About the Author

James R. Markusen is the Stanford Calderwood Professor of Economics at the University of Colorado and an NBER Research Associate.

Product Details

• Paperback: 462 pages
• Publisher: The MIT Press (August 20, 2004)
• Language: English
• ISBN-10: 0262633078
• ISBN-13: 978-0262633079
• Product Dimensions: 8.7 x 5.6 x 0.9 inches
• Shipping Weight: 1.2 pounds (View shipping rates and policies)
• Average Customer Review: 5.0 out of 5 stars  See all reviews (1 customer review)
• Amazon Best Sellers Rank: #514,979 in Books (See Top 100 in Books)

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5.0 out of 5 stars Understanding the Economic Analysis of Multinational Firms, March 21, 2009

By 

Carlos A. Cinquetti (Sao Carlos, Brazil) - See all my reviews
(REAL NAME)   

This review is from: Multinational Firms and the Theory of International Trade (Paperback)

International Trade can be either substituted by multinational enterprises (MNE), when they used a foreign plant to serve a foreign market, or complemented by it, when a firm decides to transfer the whole manufacturing to a foreign plant, maintaining the headquarter in the original country. That explains why the economic analysis of MNE, when connect to its spatial location, is a field of international trade. But this topic unfolds into several directions. For instance, what is the market structure of the imperfectly competitive markets: oligopoly or monopolisitc competition? What are the specific motivations of firms that engage in vertical or in horizontal-type of international integration? These two questions by itself opens several possibilities as to the impact that characteristics of either source country or host country, as well as the transportation costs. The own decision of going to production overseas, based on a firm-exclusive technology, is also subject to choice: with a subsidiary, or with a joint-venture with a foreign partner? This latter characteristics is equally affected by countries and geographical characteristics, and by market structure as well. Lastly, all the exquisitely constructed theoretical model of trade with MNE must pass the test of the evidence.
It does not surprise, face to the above, that MNE became a huge body in the international trade, proportional to the weight of these firms in the total of international trade. The above also explain the extremely mathematical complexity of this literature.
James R. Markusen, probably the economist who contributed the most to this literature, makes, in this book, a very valuable contribution, by both integrating these topics in a same language and doing so in a manner that further simplified its understanding.
The entry cost for new expertis definitely falls dramatically for those that choose to do so by using this book as main reference. That already qualifies the style and objectiveness of the writing.
In sum, by sparing his time to new and innovative papers, and dedicating it instead to this advanced textbook, the author gave a great contribution to the diffusion of knowledge -- that same one done, or expectedly so by MNE.