International Trade Theory and International Business

Abstract

Abstract The aim of this chapter is to acquaint researchers in the field of international business with recent research in the field of international trade, which is beginning to incorporate aspects of international business and multinational firms into the general‐equilibrium trade models that are the tools of analysis of international trade. The typical endogenous variables in general‐equilibrium trade models are described, and a simple knowledge‐capital model of the multinational enterprise (MNE) is presented. This model offers testable hypotheses about the relationship between the pattern of multinational investment and country characteristics. Some empirical results are presented from the model, which incorporate these hypotheses. The results indicate that the model should be useful for policy analysis and positive analysis of MNEs.

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