Organization of Multinational Activities and Ownership Structure

We develop a model in which multinational investors decide about
the modes of organization, the locations of production, and the
markets to be served. Foreign investments are driven by
market-seeking and cost-reducing motives. We further assume that
investors face costs of control that vary among sectors and
increase in distance. The results show that (i) production
intensive sectors are more likely to operate a foreign business
independent of the investment motive, (ii) that distance may have a
non-monotonous effect on the likelihood of horizontal investments,
and (iii) that globalization, if understood as reducing distance,
leads to more integration.