Multinationals, Exporting and Overseas Production

  • Sourafel Girma
  • Richard Kneller
  • Mauro Pisu


Domestic firms serve overseas markets either by exporting their products or by establishing foreign production facilities. The rising integration of the world economy in the last half-century and as in previous periods of integration is characterised by the simultaneous increase in both arms-length trade (exporting) and foreign direct investment (FDI). Table 9.1, using data from Obstfeld and Taylor (2003) and Maddison (2001), reports the value of world merchandise exports and the stock of foreign assets (both as a percentage of world gross domestic product (GDP)) for various time periods from 1820 to 1998. Increased integration through both trade and FDI is evident up until the inter-war period. Trade increased from 1 per cent of world output in 1820 to 4.6 per cent in 1870 to 9 per cent in 1929 and foreign assets from 6.9 per cent in 1870 to 17.5 per cent in 1913. The protectionist trade stance and capital controls of many countries during the inter-war years led to an end to this process, although the greater collapse was in foreign ownership. From the end of the Second World War the progressive liberalisation of trade, and following the collapse of the Bretton Woods international monetary system, capital controls have seen a rebound to well above pre-war highs. By the end of the sample period the ratio of exports and the stock of foreign assets to world GDP was 17.2 per cent (1998 figure) and 56.8 per cent respectively (1995 figure).


Foreign Direct Investment Location Choice Intangible Asset Foreign Production Foreign Asset 
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© Sourafel Girma, Richard Kneller and Mauro Pisu 2005

Authors and Affiliations

  • Sourafel Girma
  • Richard Kneller
  • Mauro Pisu

There are no affiliations available

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