This article reviews some of the criticisms directed towards the eclectic paradigm of international production over the past decade, and restates its main tenets. The second part of the article considers a number of possible extensions of the paradigm and concludes by asserting that it remains “a robust general framework for explaining and analysing not only the economic rationale of economic production but many organisational and impact issues in relation to MNE activity as well.”

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The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions

This paper first sets out the main features of the eclectic theory of international production and then seeks to evaluate its significance of ownership- and location-specific variables in explaining the industrial pattern and geographical distribution of the sales of U.S. affiliates in fourteen manufacturing industries in seven countries in 1970.

https://link.springer.com/content/pdf/10.1057%2Fpalgrave.jibs.8490593.pdf

Toward an Eclectic Theory of International Production: Some Empirical Tests

Theory suggests and results show that firm performance is initially positive but eventually levels off and becomes negative as international diversification increases. Product diversification moder...

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International Diversification: Effects on Innovation and Firm Performance in Product-Diversified Firms

The main task of this paper is to discuss ways in which production financed by foreign direct investment, that is, that undertaken by multinational enterprises (MNEs), has affected our thinking about the international allocation of resources and the exchange of goods and services between countries. The analysis takes, as its starting point, the growing convergence between the theories of international trade and production, and argues the case for an integrated approach to international economic involvement, based both on the location-specific endowments of countries and the ownership-specific endowments of enterprises. In pursuing this approach, the paper sets out a systemic explanation of the foreign activities of enterprises, in terms of their ability to internalise markets to their advantage. It concludes with a brief examination of some of the effects which the MNE is allegedly having on the spatial allocation of resources, and on the patterns of trade between countries.

Trade, Location of Economic Activity and the MNE: A Search for an Eclectic Approach

Using the idea that firm-specific assets associated with marketing, management, and product-specific R & D can be used to service production plants in countries other than the country in which these inputs are employed, I develop a simple general equilibrium model of international trade in which the location of plants in a differentiated product industry is a decision variable. The model is then used to derive predictions of trade pattern, volumes of trade, the share of intra-industry trade, and the share of intrafirm trade as functions of relative country size and differences in relative factor endowments.

/pdf/a-simple-theory-of-international-trade-with-multinational-4q3w8kzzsg.pdf

A Simple Theory of International Trade with Multinational Corporations

An international trade and investment theory of the firm

Location of industry and international competitiveness

F & E-Intensitat und Exportleistung: Eine mikrookonomische Betrachtung. — Der Aufsatz beschaftigt sich mit Unternehmen, die technische Neuerungen betreiben, um exklusive Informationen uber neue Produkte oder Verfahren zu erwerben, mit denen sich auf den Markten Renten abschopfen lassen. Die Eigentumsrechte an ihrem Wissen veranlassen die Unternehmen, sich wie Monopolisten zu verhalten. Wie sich innovatorische und nichtinnovatorische Unternehmen auf den Exportmarkten verhalten, wird in einem theoretischen Rahmen dargelegt. Daraus ergibt sich die Hypothese einer positiven Korrelation zwischen Innovationsintensitat und Exportwachstum. Diese These wird mit Hilfe von Daten getestet, die aus einer Stichprobe von uber hundert Firmen gewonnen wurden, die in Israel zwischen 1975 und 1981 im zivilen Bereich Forschung und Entwicklung betrieben. Intensite de RD se predice una correlation positiva entre la intensidad de innovation y el crecimiento de las exportaciones. Esta prediction es sometida a un test empirico con datos de una muestra de mas de cien empresas isrealies activas en investigation y desarrollo pertenecientes al periodo 1975–1981.

R&D intensity and export performance: A micro view

FOLKLORE has it that foreign markets are more risky than domestic markets because of political, economic, and social instability abroad. A normative implication of this belief, sometimes mentioned in the literature, is that a firm must establish itself in the domestic market before venturing into foreign markets; otherwise, it is argued, the inherent instability associated with exports might seriously damage the firm's operations. It is shown here that such implications are at variance with the diversification principle in portfolio theory. Specifically, an individual project might be very risky, yet its incorporation with other projects may decrease the overall risk of the portfolio. The overall risk of a group of projects is affected mainly by the relationships among these projects and only slightly by the individual riskiness of each. The hypothesis advanced in this study was that exports, through market diversification, tend to stabilize the firm's sales, and the larger the spread of these exports over several markets the more stable the sales. This hypothesis was tested on data selected from a sample of about 500 firms in Denmark, the Netherlands, and Israel. Results of the test were consistent with the hypothesis: sales stability and diversification of exports are indeed positively correlated.

Seev Hirsch

Papers

An international trade and investment theory of the firm

Location of industry and international competitiveness

R&D intensity and export performance: A micro view

Sales Stabilization Through Export Diversification

Firm size and export performance