This paper deals with the investment effects of regional integration agreements and discusses how such arrangements may affect inward and outward foreign direct investment flows in the integrating region. After setting up a conceptual framework for the analysis, we provide three studies focusing on different kinds of regional integration: North-North integration (Canada joining CUSFTA), North-S...

Affiliates of German firms in Eastern Europe differ from those in the rest of the world. They have smaller sales and they employ more labor. Labor productivity is thus lower than in affiliates of German firms elsewhere. Moreover, multinational activity in Eastern Europe is mostly unilaterally whereas, for industrialized countries, bilateral FDI linkages dominate. In this paper, we aim at explai...

In recent years international capital flows of all types have increased dramatically and most governments have been actively encouraging inflows of direct investment. However, concerns remain that reliance on foreign multinationals may be a risky development strategy as foreign firms are likely to be less rooted in the local economy and may be quicker to close down production. This paper asks w...

I present a model of offshoring decisions with heterogeneous firms, random adjustment costs, and endogenous markups. The model proposes a tractable probabilistic framework that goes beyond the conventional view of self-selection of more productive firms into offshoring. By characterizing the offshoring decision as a lumpy investment decision subject to heterogeneous adjustment costs, the model ...

Ragnar Frisch on various occasions claimed that he had invented input-output analysis in a 1934 paper titled “Circulation planning”. Although prominently published in Econometrica, Frisch’s contribution has hardly been discussed in the input-output literature. Frisch’s paper was an attempt to explain the incapsulating phenomena of economic depressions and thus arose from a different motivation ...

This paper examines the implications of international fragmentation of production for trade patterns in the Pacific Rim, with special emphasis on regional and global integration of countries in East Asia. The analysis reveals that the degree of dependence of East Asia on this new global division labour is much larger compared to the other countries in the Pacific Rim and Europe. Networkrelated ...

This paper studies the impact of innovation on the organizational structure. The theoretical framework predicts that a larger parental pool of knowledge raises the probability of offshoring. This holds in a national as well as an international context. However, when the producer loses territorial protection, the changeover from non-integration to integration is delayed. Employing data on German...

Foreign-dominated banking sectors, such as those prevalent in Central and Eastern Europe, are susceptible to two major sources of systemic risk: (i) linkages between local banks and (ii) linkages between a foreign mother bank and its local subsidiary. Using a nonparametric method based on extreme value theory, which accounts for fat-tail shocks, we analyze interdependencies in downward risk in ...

This paper examines the effect of geographic and industrial diversification on firm value for a sample of 1,914 corporations from 18 countries. Our results indicate that both geographic and product diversification destroy value at high levels of diversification, suggesting that agency and influence costs arising from the increased complexity outweigh the benefits of diversification at high degr...

The Analytic Hierarchy Process (AHP) has been proposed in recent literature as an emerging solution approach to large, dynamic, and complex real world multi-criteria decision making problems, such as the strategic planning of organizational resources and the justification of new manufacturing technology. This paper presents an application of the AHP in firms' long-term overall performance evalu...