The complex integration strategies of multinationals and cross country dependencies in the structure of foreign direct investment

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237 Scopus citations

Abstract

The behavior of many multinational enterprises is not well described by existing models of foreign direct investment (FDI). Firms often follow strategies that involve vertical integration in some countries and horizontal integration in others, a strategy known as complex integration. This paper presents a three-country model that is used to analyze why firms might follow a strategy of complex integration. My analysis reveals that complex integration strategies create complementarities between potential host countries that have important implications for the structure of FDI. The analysis also shows that falling transport cost between countries may increase the importance of complex integration strategies.

Original languageEnglish (US)
Pages (from-to)293-314
Number of pages22
JournalJournal of International Economics
Volume60
Issue number2
DOIs
StatePublished - Aug 2003

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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