NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Ignatius Horstmann

University of Toronto
Rotman School of Management
105 St. George St.
Toronto, ON M5S 3E6
Canada
Tel: 416-978-1888

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Institutional Affiliation: University of Toronto

NBER Working Papers and Publications

December 2008Physical Capital, Knowledge Capital and the Choice Between FDI and Outsourcing
with Yongmin Chen, James R. Markusen: w14515
There exist two approaches in the literature concerning the multinational firm's mode choice for foreign production between an owned subsidiary and a licensing contract. One approach considers environments where the firm is transferring primarily knowledge-based assets. An important assumption there is that the relevant knowledge is absorbed by the local manager or licensee over the course of time: knowledge is non-excludable. More recently, a number of influential papers have adopted a property-right view of the firm, assuming the application abroad of physical capital, the owner of which retains full and exclusive rights to the capital should a relationship break down. In this paper we combine both forms of capital assets in a single model. The model predicts that foreign direct investme...

Published: Yongmin Chen & Ignatius J. Horstmann & James R. Markusen, 2012. "Physical capital, knowledge capital, and the choice between FDI and outsourcing," Canadian Journal of Economics/Revue canadienne d'économique, vol 45(1), pages 1-15. citation courtesy of

 
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