Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/181304 
Authors: 
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper No. 7104
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Using a unique dataset on worldwide multinational corporations with precise location of headquarters and affiliates, I present evidence of a trade-off between distance to the headquarters and the knowledge intensity of the foreign subsidiary’s economic activity, emerging from dynamics related to the proximity-concentration hypothesis. This trade-off is strongly diminished the higher the overlap in working hours between the headquarters and its foreign subsidiary. In order to rule out biases arising from confounding factors, I implement a regression discontinuity framework to show that the economic activity of a foreign subsidiary located just across the time zone line that increases the overlap in working hours with its headquarters is, on average, about one percent higher in the knowledge intensity scale. I find no evidence of the knowledge intensity and distance trade-off weakening when a non-stop flight exists between the headquarters and the foreign subsidiary. The findings suggest that lower barriers to real-time communication within the multinational corporation play an important role in the location strategies of multinational corporations.
Subjects: 
multinational firms
multinational corporations
knowledge
location
proximity concentration hypothesis
FDI
JEL: 
F23
L22
L25
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.