The study of multinationals in international trade: Revisiting the literature

Abstract

In this project, we focus on the theories of international trade and heterogeneous multinational firms. With these objectives in mind, we revisited the related literature. We try to show the developments in the theory of trade and multinational firms in relation with the behavior of heterogeneous firms; their self-selection, and how they can influence in the global market. Overall, we find that the success archived by firms when operating in international markets is due to a mix of different components that eventually leads to an increase of social welfare. In this way, firstly, they get a greater productivity compared to its competitors. They also enhance innovation, and the comparative advantage position of firms in terms of ownership, and internalization. Secondly, the presence of multinational firms might improve social welfare through wage increases and technological progress.