Organization of multinational activities and ownership structure

We develop a model of a multinational firm serving a foreign market that needs to decide about the location of production and the optimal ownership structure. We study how the location decision and the ownership choice interact, how these decisions are affected by (cultural) distance and how they depend on industry characteristics. Our analysis shows that (i) distance leads to less integration in low tech, but tends to lead to more integration in high tech industries, (ii) distance may have a non-monotonous effect on the likelihood of horizontal investments as opposed to exports, and (iii) marketing intensive industries are relatively more likely to produce close to their customers.