TAILIEUCHUNG - Global Production and Trade in the Knowledge Economy

Raw materials used in the production of bio based products are produced in agriculture, forestry and microbial systems. The content of the material undergoes treatment and processing in a refinery to convert it, similar to the petroleum. While petroleum is obtained by extraction, biomass already exists as a product (Kamm & Kamm, 2004) that can then be modified within the actual process, to optimally adapt the results so as to obtain particular target product(s). This is contained within the technology of the bio refinery whose objective is to convert the raw material into intermediate and final useful products. The basic principles of the biorefinery are shown in Figure3. A biorefinery can utilise different feedstocks, can incorporate many different processes, and can result in many different end products. The exact configuration of a particular biorefinery will depend on market prices of inputs, demand for final products, access to the appropriate technologies, availability of financing, operational knowledge, and supporting policies and institutions. . | Mi The University of Nottingham research paper series Theory and Methods Research Paper 2009 07 Global Production and Trade in the Knowledge Economy by Wolfgang Keller and Stephen R. Yeaple The Centre acknowledges financial support from The Leverhulme Trust under Programme Grant F 00 114 AM 71 ÍKícith 31 Glslnbhúltx II I i airniii ill- The Authors Wolfgang Keller is a professor at Department of Economics University of Colorado at Boulder Boulder CO 80309 email Stephen R. Yeaple is an associate professor at Department of Economics Penn State University email syr3@ . Acknowledgements The authors thank Gene Grossman Jim Rauch Andres Rodriguez-Clare Jonathan Vogel as well as participants of the 2008 Philadelphia Fed Trade Conference for suggestions. The statistical analysis of firm-level data on . multinational corporations reported in this study was conducted at the . Bureau of Economic Analysis under arrangements that maintained legal confidentiality requirements. Views expressed are those of the authors and do not necessarily reflect those of the Bureau of Economic Analysis. Global Production and Trade in the Knowledge Economy by Wolfgang Keller and Stephen R. Yeaple Abstract This paper presents and tests a new model of multinational firms to explain a rich array of multinational behaviour. In contrast to most approaches here the multinational faces costs to transferring its knowhow that are increasing in technological complexity. Costly technology transfer gives rise to increasing marginal costs of serving foreign markets which explains why multinational firms are often much more successful in their home market compared to foreign markets. The model has four key predictions. First as transport costs between multinational parent and affiliate increase firms with complex production technologies find it relatively difficult to substitute local production for imports from the parent because complex technologies are relatively .