Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/185699
Authors: 
Gumpert, Anna
Year of Publication: 
2017
Series/Report no.: 
Discussion Paper No. 29
Abstract: 
This paper provides the first in-depth study of the organization of knowledge in multinational firms. In the theory, knowledge is a costly input for firms that they can acquire at their headquarters or their production plants. Communication costs impede the access of the plants to headquarter knowledge. The model shows that multinational firms systematically acquire more knowledge at both their foreign and domestic plants than non-multinationals if their foreign plants face higher communication costs with headquarters than their domestic plants. This theoretical prediction helps understand why multinational firms pay higher wages to workers than non-multinational firms, and why their sales decrease across space. The empirical analyses show that higher communication costs indeed decrease multinational firms\' foreign sales. Consistent with model-specific comparative statics, the decrease is stronger in sectors with less predictable production processes. Novel data on corporate transferees allow shedding light on one tool of multinational firms\' organization of knowledge.
Subjects: 
multinational firm
knowledge hierarchy
organization
geography of FDI
multinational wage premium
corporate transferees
JEL: 
D21
D24
F21
F23
Document Type: 
Working Paper

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