Template-Type: ReDIF-Paper 1.0
Author-Name: Richard Chisik
Author-X-Name-First: Richard
Author-X-Name-Last: Chisik
Author-Email: rchisik@economics.ryerson.ca 
Author-Workplace-Name: Department of Economics, Ryerson University, Toronto, Canada
Title: Reputational Comparative Advantage and Multinational Enterprise
Abstract: For a firm without a readily identifiable brand name, quality reputation may solely reflect the
country of origin. In this paper we endogenize country-of-origin reputations and show that these selffulfilling
reputations determine not only the average quality of a country’s exports but also the type of
products in which a country specializes. Hence, the pattern of international trade can be determined by
reputational comparative advantage. Specialization according to reputational comparative advantage can
also establish the location of the host and the parent firm in a multinational enterprise. Furthermore,
multinationals that internalize production in a single firm can eradicate a low reputation equilibrium and,
therefore, can increase host-country welfare by a greater amount than under a licensing arrangement.
Finally, this reputation effect can identify whether internalization, or licensing, is more likely to occur.
Classification-JEL: F12, F23, J71, L15 
Keywords: Country-of-Origin, Quality Reputations, Multinational Enterprise, Internalization, Statistical
Discrimination.
Length: 33 pages
Creation-Date: 2010-08
Number: 016
File-URL: http://economics.ryerson.ca/workingpapers/wp016.pdf
File-Format: Application/pdf
Handle: RePEc:rye:wpaper:wp016