A model of multinational behavior is presented in which either the existence or absence of multinationals can be a Nash equilibrium outcome. The key determinant is the relationship between plant scale economies (a force for geographic centralization) and multiplant economies plus transport costs (leading to multinationality). The model predicts that multinational enterprise production arises when firm-specific and transportation costs are large relative to plant scale economies. The latter are both a technological and a strategic variable in the entry decision.
No takes yet. Share an insight, caveat, or question.
Horstmann et al. (1987) studied this question.