NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Discriminating Among Alternative Theories of the Multinational Enterprise

James R. Markusen, Keith E. Maskus

NBER Working Paper No. 7164
Issued in June 1999
NBER Program(s):   ITI

Recent theoretical developments have incorporated endogenous multinational firms into the general-equilibrium model of trade. One simple taxonomy separates the theory into vertical' models in which firms geographically separate activities by stages of production and horizontal' models of multi-plant firms which duplicate roughly the same activities in many countries. We refer to a hybrid of these two as the 'knowledge capital model'. In this paper, we nest these three models within an unrestricted model. Econometric tests give strong support to the horizontal model and overwhelming reject the vertical model.

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Document Object Identifier (DOI): 10.3386/w7164

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