This dissertation examines some issues related to multinational corporations (MNCs). All studies are based on a unique data set of individual Swedish MNCs collected over many years by the Industrial Institute for Economic and Social Research (IUI) in Stockholm.
Chapter I discusses the relevancy of the studies included in the thesis and puts them into perspective by relating them to the previous literature. A brief summary of the thesis is also presented.
The choice between takeovers and greenfields in foreign direct investment is analyzed in Chapter II. In contrast to earlier studies, which assume that greenfields are more risky than takeovers, the starting point here is that MNCs operate on oligopolistic markets and that greenfields add production capacity to the industry. The results show that previous presence in the market increases the probability of takeovers, since a new venture would increase the competitive pressure on the investing firms existing manufacturing affiliates. A new empirical model is introduced in which the firm has the alternative to refrain from investment altogether.
Chapter III examines the influence of host country characteristics on the location of foreign production. Particular attention is directed towards agglomeration tendencies in the location of firms. The sample selection incorporates countries where firms have decided not to establish affiliate production, which is an extension in comparison with previous research in this area. The results suggest that agglomeration effects are present, predominantly in technologically advanced industries. It is also shown that market size, the supply of skilled labor and earlier export patterns, affect the location of overseas production.
The impact of overseas production on parent exports is studied in Chapter IV. Two methodological applications are introduced: 1) In order to avoid sample selection bias, the model also includes countries to which the firm exports, but where it has not yet established any affiliates; 2) The effect of affiliate exports to "third countries" is incorporated. The results indicate that increased foreign production both substitutes exports of finished goods and attracts intermediate goods from the parent. In contrast to previous studies, the net effect is negative, albeit significant only in the case of affiliate exports in the EC.
In Chapter V, the simultaneous relationship between R&D and foreign sales is analyzed. It is argued that this relationship should especially apply to MNCs based in small open economies due to the finns' heavy dependence on foreign markets. The only previous study addressing this issue used data on MNCs originating from the United States, a country with a large domestic market, and did not find evidence of the hypothesized simultaneous relation. The empirical results reported in the present study suggest a positive and significant impact in both directions.
