Comments

Professor Furubotn argues that learning curve effects provide an additional argument for the growing emergence of multinational enterprise (MNE). He first develops a model which includes technical learning as a cost reducing shift parameter in an oligopolistic optimization calculus. The specification of the model is such that augmenting cumulative output over any given period of time leads to greater profits. Because exporting to foreign markets is excluded explicitly, adding foreign production to domestic output follows straightforwardly. He then evaluates alternative modes of exchanging information across markets or within internal organizations. The exchange of information leading to higher efficiency in production (learning) has high costs in arm’s length market transactions and internal governance structures are more efficient in transmitting the required information. Thus: technical learning is an additional driving force for MNE.