Year: 2011
Type: article
Abstract: This paper shows that standard predictors of the export versus FDI decision hold for manufacturing but not for service industries.I develop an alternative model which decomposes each industry into the tasks required for production and uses these tasks to predict the location of production for that industry.Industries requiring direct communication with consumers are more likely to be produced in the destination market.Production of more nonroutine activities is more likely to occur at the multinational's headquarters for export, especially when the destination market has weak institutions.These predictions are tested using firm-level data from the Bureau of Economic Analysis US Direct Investment Abroad Benchmark Survey of Multinationals combined with task-level data from the Department of Labor's Occupational Information Network.The task-based approach developed in this paper performs well for both manufacturing and service industries, has greater explanatory power than alternative proximity concentration or comparative advantage explanations, and is robust to a variety of specifications.* The statistical analysis of firm-level data on U.S. multinational companies was conducted at the Bureau of Economic Analysis, U.S. Department of Commerce under arrangements that maintain legal confidentiality requirements.
Author: Lindsay Oldenski
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2154258117