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Testing A Life‐Cycle Hypothesis Of The Balance‐Of‐Payments Effects Of Multinational Corporations

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  • MARTIN F. J. PRACHOWNY
  • J. DAVID RICHARDSON

Abstract

This paper proposes one possible determinant of the diversity of experience and behavior of multinational corporations and examines it empirically. The determinant is the “age” of foreign operations or “maturity” of foreign experience. We find empirical support for the proposition that the balance‐of‐payments flows between U.S. manufacturing parents and their foreign affiliates follow a predictable life cycle or sequence. We also find that the lags between “youth” and “full maturity” are perhaps much longer than the existing literature has suggested.

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  • Martin F. J. Prachowny & J. David Richardson, 1975. "Testing A Life‐Cycle Hypothesis Of The Balance‐Of‐Payments Effects Of Multinational Corporations," Economic Inquiry, Western Economic Association International, vol. 13(1), pages 81-98, March.
    • Handle: RePEc:bla:ecinqu:v:13:y:1975:i:1:p:81-98
    DOI: 10.1111/j.1465-7295.1975.tb01105.x
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    1. Raymond Vernon, 1966. "International Investment and International Trade in the Product Cycle," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 80(2), pages 190-207.
    2. Alan K. Severn, 1972. "Investment and Financial Behavior of American Direct Investors in Manufacturing," NBER Chapters, in: International Mobility and Movement of Capital, pages 367-396, National Bureau of Economic Research, Inc.
    3. Frank S Wert, 1973. "A Product Cycle Model of the Balance of Payments Impact of U.S Based Multinationalism," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 4(2), pages 51-64, June.
    4. Caves, Richard E, 1971. "International Corporations: The Industrial Economics of Foreign Investment," Economica, London School of Economics and Political Science, vol. 38(149), pages 1-27, February.
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