THE ORGANIZATION OF FIRMS IN A GLOBAL ECONOMY

THE ORGANIZATION OF FIRMS IN A GLOBAL ECONOMY

Elhanan Helpman
Dalia Marin
Thierry Verdier
Copyright Date: 2008
Published by: Harvard University Press
https://www.jstor.org/stable/j.ctt13x0gdj
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  • Book Info
    THE ORGANIZATION OF FIRMS IN A GLOBAL ECONOMY
    Book Description:

    Presents a new research program that is transforming the study of international trade. Until a few years ago, models of international trade did not recognize the heterogeneity of firms and exporters, and could not provide good explanations of international production networks. Now such models exist and are explored in this volume.

    eISBN: 978-0-674-03854-7
    Subjects: Finance, Business

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Preface
    (pp. vii-x)
  4. Introduction
    (pp. 1-8)

    International trade has been an integral part of economics from the beginning. The subject has changed dramatically over the years, however. While the Ricardian doctrine of comparative advantage dominated the field in the nineteenth century and the beginning of the twentieth, the Heckscher-Ohlin approach—which focuses on differences across countries in factor endowments rather than differences in technology—dominated the field in the twentieth century until the late 1970s. The field was transformed in the 1980s with the introduction of what was dubbed the “new” trade theory, which incorporated monopolistic competition and product differentiation, as well as economies of scale...

  5. 1 Contractual Frictions and Global Sourcing
    (pp. 9-54)
    POL ANTRÀS and ELHANAN HELPMAN

    Insights from neoclassical trade theory and new trade theory have improved our understanding of the structure of foreign trade and investment. Recent developments in the world economy have sparked, however, an increased interest in new theoretical approaches designed to better understand the evidence about firms that organize production on a global scale. These developments include the growing role of multinational corporations in the global economy,¹ their engagement in more complex integration strategies,² and the growing share of intermediate inputs in trade flows.³

    Although traditional theories allow for trade in intermediate inputs and for the emergence of international production networks,⁴ they...

  6. 2 The Boundaries of the Multinational Firm: An Empirical Analysis
    (pp. 55-83)
    NATHAN NUNN and DANIEL TREFLER

    This volume is the culmination of a rich and recent research agenda into the determinants of intrafirm trade. Unlike the older literature on international trade in the presence of imperfect competition, for example, Helpman and Krugman (1985), the current literature provides amuch more intellectually satisfying notion of what constitutes a firm. It thus provides us with deeper insights into which elements of international trade are done internally to the firm (multinational or intrafirm trade) and which are done outside the boundaries of the firm. Seminal contributions include McLaren (2000), Antràs (2003, 2005), Grossman and Helpman (2002, 2003, 2004, 2005), and...

  7. 3 Contract Enforcement, Comparative Advantage, and Long-Run Growth
    (pp. 84-106)
    GIANMARCO I. P. OTTAVIANO

    From a historical perspective there is increasing agreement that institutions (such as contract enforcement, investor protection, and constitutions) have played a key role in shaping the international pattern of economic development, and, still today, developed countries typically feature better institutions than developing ones (see, e.g., La Porta et al. 1998; Acemoglu, Johnson, and Robinson 2002). A growing stock of empirical evidence also suggests that institutions (especially, contract enforcement) affect the international pattern of comparative advantage and, thus, sectoral specialization as well as trade flows. For instance, Antràs (2003) shows that, when investments related to the labor input are harder to...

  8. 4 The Dynamics of Firm-Level Adjustment to Trade Liberalization
    (pp. 107-141)
    JAMES A. COSTANTINI and MARC J. MELITZ

    Recent evidence on firm-level adjustments to trade liberalization have documented that firms jointly make innovation and export-market–participation decisions (see Trefler 2004; Bustos 2005; Verhoogen 2008; Aw, Roberts, and Winston 2007). Another now large and established research agenda using microlevel production data has confirmed time and again the strong self-selection of more-productive firms into export markets. More recently, another branch of this literature has found some evidence for a “learning by exporting” phenomenon, whereby firms improve their productivity subsequent to export market participation (see, for instance, Delgado, Farinas, and Ruano 2002; Girma, Greenaway, and Kneller 2004; Topalova 2004; de Loecker...

  9. 5 Competing in Organizations: Firm Heterogeneity and International Trade
    (pp. 142-172)
    DALIA MARIN and THIERRY VERDIER

    Until recently, international trade theory treated firms as a black box. The firm is characterized by a production function according to which the factors of production (capital, labor) are transformed into consumption goods. Moreover, these firms are assumed to be of equal size and productivity. In reality, however, firms consist of organizations with an inner life and differ in size, productivity, and type of firm organization.

    Firm heterogeneity in size and productivity in the same industry are now widely recognized in various empirical firm-level studies (Bernard and Jensen 1999; Clerides, Lach, and Tybout 1998). A number of recent papers have...

  10. 6 Optimal Choice of Product Scope for Multiproduct Firms under Monopolistic Competition
    (pp. 173-199)
    ROBERT C. FEENSTRA and HONG MA

    Recent literature in trade has begun to explore multiproduct firms. As documented by Bernard, Redding, and Schott (2006a), 41% of U.S. manufacturing firms produce in multiple, five-digit SIC industries, accounting for 91% of total sales. Using a large and unique dataset that contains product UPC barcodes, Broda and Weinstein (2007) also show that the majority of product creation and destruction happens within the boundaries of the firm. The concentration of sales in very large, multiproduct firms is even more apparent when we look at their exports sales. Bernard, Jensen, Redding, and Schott (2007) show that the top 1% of U.S....

  11. 7 Firm Heterogeneity, Intra-Firm Trade, and the Role of Central Locations
    (pp. 200-230)
    STEPHEN ROSS YEAPLE

    Multinational enterprises, those firms that produce in more than one country, play a key role in the conduct of international commerce. According to UNCTAD (2004) the volume of sales of the foreign affiliates of multinational enterprises are more than twice the volume of global exports. Further, multinational enterprises (MNE) account for much of international trade (Hanson, Mataloni, and Slaughter 2005). Although the empirical trade literature has accumulated a wealth of facts concerning the behavior of multinational enterprises, most empirical work has been motivated by two-country models that cannot capture the rich pattern of multinational investments across countries (Blonigen 2005).

    A...

  12. 8 Export Dynamics in Colombia: Firm-Level Evidence
    (pp. 231-272)
    JONATHAN EATON, MARCELA ESLAVA, MAURICE KUGLER and JAMES R. TYBOUT

    Research in international trade, both theoretical and quantitative, is increasingly focused on the role of firm heterogeneity in shaping trade flows. One strand of the literature shows how firm-specific productivity shocks affect the mix of exporting firms and their foreign sales volumes (e.g., Clerides, Lach, and Tybout 1998; Bernard and Jensen 1999; Melitz 2003; Bernard et al. 2003; Das, Roberts, and Tybout 2007; Bernard et al. 2007). These studies provide insight into why some producers export and others do not, and into the role of market entry costs in shaping export dynamics. Another strand of the literature documents and interprets...

  13. 9 Fair Wages and Foreign Sourcing
    (pp. 273-310)
    GENE M. GROSSMAN and ELHANAN HELPMAN

    Most social scientists agree that humans care not only about their own absolute well-being but also about their standingcompared to others. Relative position affects individuals’ self-reporting of their happiness (Easterlin 2001; Frey and Stutzer 2002; Luttmer 2005) and job satisfaction (Clark and Oswald 1996; Hammermesh 2001). It features prominently in psychologists’ theories of internal equity and relative deprivation, in sociologists’ theories of social exchange and in economists’ theories of reciprocity and internal labor markets. It is accepted wisdom among personnel managers and authors of compensation texts (Bergmann and Scarpello 2000; Milkovich and Newman 2005). Based on a wealth of...

  14. 10 Organizing Offshoring: Middle Managers and Communication Costs
    (pp. 311-340)
    POL ANTRÀS, LUIS GARICANO and ESTEBAN ROSSI-HANSBERG

    Recent developments in the world economy have led to a staggering disintegration of the production process across borders.¹ Why do firms decide to offshore certain parts of their production process to foreign locations? What qualifies certain countries as particularly attractive locations to offshore? In this chapter we address these questions with a theory of production hierarchies in which cross-country differences in the distribution of skills, as well as differences in the cost of transmitting knowledge internationally versus locally, determine the decision of whether or not to offshore to a particular country.

    Our model illustrates how the decision to offshore parts...

  15. List of Contributors
    (pp. 341-342)
  16. Author Index
    (pp. 343-346)
  17. Subject Index
    (pp. 347-356)