The determinants of international production

TLDR: In this paper, the authors present a survey of the reasons why firms invest overseas, where they locate their foreign operations, and what determines the amount and composition of international production, with sectoral, national, or cosmopolitan interests in mind.

Abstract: and as vehicles for the transference of new skills and technologies, they are no less pertinent to the theory of economic development. The sharing of the costs and benefits of their activities between the countries in which they operate raises complex and fascinating issues for the welfare economist. The geographical flexibility of their procurement, production, and marketing strategies adds a new dimension to the theories of industrial relations and collective bargaining; while their operations are not only influenced by, but help to fashion, a whole range of monetary and fiscal policies used by national governments to advance economic and social goals. I make these observations by way of introduction, because, in interpreting the various explanations of the origin and growth of international business, one is very conscious of the particular interests of the researcher. This is shown both in the type of questions asked, and the approach and techniques used to answer them. The questions 'why do firms invest overseas?', 'where do firms locate their foreign operations?' and 'what determines the amount and composition of international production?' pose similar, but not identical issues. Each is concerned with the behaviour of firms, but while the first draws on the techniques of micro-investment theory, the second is of interest to the location theorist, and the third needs a knowledge of international trade and industrial organization theory. Moreover, each of the questions may be tackled from a positive or a normative viewpoint; and with sectoral, national, or cosmopolitan interests in mind.