Global fixed capital investment by multinational firms

R.A. Belderbos; K. Fukao; K. Ito; W.A. Letterie

doi:10.1111/ecca.12014

Global fixed capital investment by multinational firms

R.A. Belderbos^*, K. Fukao, K. Ito, W.A. Letterie

^*Corresponding author for this work

Organisation,Strategy & Entrepreneurship

Research output: Contribution to journal › Article › Academic › peer-review

Abstract

We develop and test a model of the simultaneous determination of global gross fixed capital investments by multinational firms. We integrate a model of multi-product firms choosing optimal manufacturing locations with a model of dynamic investment optimization. Firms adjust capital stocks in each location in accordance with the expected marginal profitability of capital. Analysis of 1504 fixed capital investment decisions by Japanese multinational firms confirms the prediction that investment is determined not only by total factor productivity, effective demand, and wage levels in the host country, but also by wage levels in other countries in which the firm operates.

Original language	English
Pages (from-to)	274-299
Number of pages	26
Journal	Economica
Volume	80
Issue number	318
DOIs	https://doi.org/10.1111/ecca.12014
Publication status	Published - Apr 2013

Keywords

FOREIGN DIRECT-INVESTMENT
LEVEL EVIDENCE
PRODUCTIVITY
ENTERPRISES
EXPORT
FDI
COUNTRIES
NETWORKS
LOCATION
MODEL

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10.1111/ecca.12014

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title = "Global fixed capital investment by multinational firms",

abstract = "We develop and test a model of the simultaneous determination of global gross fixed capital investments by multinational firms. We integrate a model of multi-product firms choosing optimal manufacturing locations with a model of dynamic investment optimization. Firms adjust capital stocks in each location in accordance with the expected marginal profitability of capital. Analysis of 1504 fixed capital investment decisions by Japanese multinational firms confirms the prediction that investment is determined not only by total factor productivity, effective demand, and wage levels in the host country, but also by wage levels in other countries in which the firm operates.",

keywords = "FOREIGN DIRECT-INVESTMENT, LEVEL EVIDENCE, PRODUCTIVITY, ENTERPRISES, EXPORT, FDI, COUNTRIES, NETWORKS, LOCATION, MODEL",

author = "R.A. Belderbos and K. Fukao and K. Ito and W.A. Letterie",

year = "2013",

month = apr,

doi = "10.1111/ecca.12014",

language = "English",

volume = "80",

pages = "274--299",

journal = "Economica",

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TY - JOUR

T1 - Global fixed capital investment by multinational firms

AU - Belderbos, R.A.

AU - Fukao, K.

AU - Ito, K.

AU - Letterie, W.A.

PY - 2013/4

Y1 - 2013/4

N2 - We develop and test a model of the simultaneous determination of global gross fixed capital investments by multinational firms. We integrate a model of multi-product firms choosing optimal manufacturing locations with a model of dynamic investment optimization. Firms adjust capital stocks in each location in accordance with the expected marginal profitability of capital. Analysis of 1504 fixed capital investment decisions by Japanese multinational firms confirms the prediction that investment is determined not only by total factor productivity, effective demand, and wage levels in the host country, but also by wage levels in other countries in which the firm operates.

AB - We develop and test a model of the simultaneous determination of global gross fixed capital investments by multinational firms. We integrate a model of multi-product firms choosing optimal manufacturing locations with a model of dynamic investment optimization. Firms adjust capital stocks in each location in accordance with the expected marginal profitability of capital. Analysis of 1504 fixed capital investment decisions by Japanese multinational firms confirms the prediction that investment is determined not only by total factor productivity, effective demand, and wage levels in the host country, but also by wage levels in other countries in which the firm operates.

KW - FOREIGN DIRECT-INVESTMENT

KW - LEVEL EVIDENCE

KW - PRODUCTIVITY

KW - ENTERPRISES

KW - EXPORT

KW - FDI

KW - COUNTRIES

KW - NETWORKS

KW - LOCATION

KW - MODEL

U2 - 10.1111/ecca.12014

DO - 10.1111/ecca.12014

M3 - Article

SN - 0013-0427

VL - 80

SP - 274

EP - 299

JO - Economica

JF - Economica

IS - 318

ER -

Global fixed capital investment by multinational firms

Abstract

Keywords

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