Thuế quốc tế_paper1

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What is a multinational firm? (cont.)
In U.S. statistics, a U.S. plant is considered to be
controlled by a foreign firm, if 10 percent or more of the
stock of the U.S. firm owning this U.S. plant is held by a
foreign firm.

Notice that this definition makes it possible for a U.S.
firm to be a U.S. multinational and an affiliate of a
foreign multinational at the same time. While such
cases exist - e.g. the U.S. chemical company DuPont
simultaneously controlled and was controlled by the
Canadian chemical company Seagram from 1981 until
1995 - they are the exception.


International Commercial Policy
Multinational Firms and Foreign Direct Investment
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Basic facts about multinational firms
The value added of all multinational firms accounts for
around 25 percent of world GDP. The value added of
foreign affiliates of multinational firms alone accounts
for around 10 percent of world GDP.

Around one-third of world trade is intra-firm trade.
Around another one-third involves multinational firms in
one of the two sides of the exchange.

The 700 largest multinational firms account for around
50 percent of world R&D spending.


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Multinational Firms and Foreign Direct Investment
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What is FDI?
Recall that a firm must acquire a controlling stake in a
foreign firm in order to become multinational.

It can do so either by newly creating a foreign firm
(“international greenfield investment”) or by acquiring an
existing foreign firm (“international M&A”).

Either method involves an international capital flow
referred to as FDI.


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Multinational Firms and Foreign Direct Investment
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What is FDI? (cont.)
The two most common forms of FDI are horizontal FDI
and vertical FDI.

Horizontal FDI occurs if a firm invests in the same
industry abroad in which it operates domestically – e.g.
Toyota builds an auto manufacturing plant in the U.S

Vertical FDI occurs if a firm invests in a supplier industry
abroad – e.g. Intel builds a chip assembly plant in
Malaysia.


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Multinational Firms and Foreign Direct Investment
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Some facts about FDI
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Multinational Firms and Foreign Direct Investment
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Source: World Investment Report 2012
Some facts about FDI (cont.)
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Multinational Firms and Foreign Direct Investment
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Source: World Investment Report 2012
Some facts about FDI (cont.)
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Multinational Firms and Foreign Direct Investment
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Source: World Investment Report 2012
Global fragmentation without FDI
Of course, firms do not necessarily have to become
multinational firms/engage in FDI to become part of a
globally fragmented production process:




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Multinational Firms and Foreign Direct Investment
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same firm
(multinational)
different firm
(not multinational)
horizontal
fragmentation
horizontal FDI international franchising?
vertical
fragmentation
vertical FDI,
international outsourcing
offshoring
Examples
These distinctions are best illustrated with some
concrete examples. We will look at Toyota, Intel, Nike,
and McDonald’s.

Do these firms primarily undertake horizontal FDI,
vertical FDI, offshoring, or international franchising?
And what are their motivations for doing so?

Of course, firms rarely engage only in horizontal FDI,
vertical FDI, offshoring, or international franchising so
that such classifications are always imperfect.

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Multinational Firms and Foreign Direct Investment
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Example #1: Toyota
Toyota is the world’s leading auto maker. It is
headquartered in Japan and its brands include
Toyota, Lexus, Scion, etc.

In 2009, Toyota employed 320,800 people and its
sales were ¥20.529 trillion.

Toyota has factories all over the world and sells
cars in more than 140 countries.
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Multinational Firms and Foreign Direct Investment
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