In This Review

Multinational Firms in the World Economy
Multinational Firms in the World Economy
By Giorgio Barba Navaretti and Anthony J. Venables
Princeton University Press, 2004, 336 pp

Multinational corporations (MNCs), a source of controversy for decades (recall Canadian and French sensitivities about American overseas investment in the 1960s), are now regarded as one of the spearheads of globalization. This book, a significant synthetic work on an important and growing component of the world economy, explores in depth the theoretical motivations for foreign direct investment (FDI), as opposed to exporting or licensing foreign firms, and reviews the extensive but still incomplete empirical literature on the determinants of FDI, the impact on receiving countries, and the impact on home countries. Ireland provides a case study of an economy in which FDI played a highly transformational role. MNCs typically outperform purely domestic firms on a variety of indicators, in both home and host countries. Contrary to widespread belief, the authors find no systematic evidence that investment abroad reduces an MNC's employment in the home country. The book draws heavily on economic analysis and recent scholarly research, but its main results and conclusions are accessible to noneconomists.