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    Divide and Rule: Geographical Diversification and the Multinational Firm


    Leahy, Dermot (2004) Divide and Rule: Geographical Diversification and the Multinational Firm. Open Economies Review, 15. pp. 363-374. ISSN 0923-7992

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    Abstract

    We develop a model to illustrate a motive for FDI that derives from a firm’s overall locational strategy. A firm, that initially has a plant in its home country, may choose to also have a foreign plant in order to improve its bargaining position versus local labour unions. This permits the firm to reduce wages. Furthermore, the existence of a second foreign plant acts to discipline the demands of foreign workers. Thus, the firm is faced with a link between the wage and its degree of geographical diversification. This drives up the number of plants the firm has in equilibrium.

    Item Type: Article
    Keywords: foreign direct investment; labour unions; multinational corporations; geographical diversification;
    Academic Unit: Faculty of Social Sciences > Economics, Finance and Accounting
    Item ID: 8465
    Depositing User: Dermot Leahy
    Date Deposited: 18 Jul 2017 11:12
    Journal or Publication Title: Open Economies Review
    Publisher: Springer Verlag
    Refereed: Yes
    URI:

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