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:	Publisher
Use Licence:	This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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