Customer Reviews

Multinational Firms and the Theory of International Trade

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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.