Scientific Disciplinary Sector (SSD)
SECS-P/01 - ECONOMICS
primo semestre (lauree magistrali) dal Oct 4, 2021 al Dec 17, 2021.
Departing from traditional theory of international trade based on comparative advantage, in this course we focus on theories of trade based on the firm. Globalization has substantially changed the world economy and the nature of firms. There has been an increase in Foreign Direct Investments (FDI). Sub-contracting abroad in now a common practice. A third of total trade is intrafirm. Therefore, by acknowledging that firms - not countries - are involved in trade, recent developments have investigated the decisions to export and invest abroad at the firm level. The aim of the course is thus to provide analytical and conceptual tools - both theoretical and empirical - to understand the internationalization choices of companies, whether they export, import, or make foreign direct investments. The course is held in English. At the end of the course, students will be able to: - understand the economic reasons and the effects of the internationalization choices of firms; - have an overview of the problems inherent in internationalization processes; - to read and elaborate critically and autonomously the problems and perspectives that characterize the firms engaged in foreign markets both for the production and for the marketing of their products. - Finally, the student will also learn transferable skills, such as autonomy of judgment and critical sense with respect to the topics covered, written communication skills, and ability to learn independently.
In this course we will cover the main models that consider the firms' decisions to export and/or invest abroad; we will discuss how trade choices may affect (and are affected by) the organizational form of firms; we will discuss the evolution of global value chains; the main flows of trade in goods and services; the main entry modes into foreign markets. While the focus is on general trends and phenomena, we will also touch on the problems of Small and Medium Enterprises (SMEs) competing in global markets.
- Heterogeneous firms and the decision to export. Melitz model. Effects of trade liberalization and reallocation effects.
- Firms and the decision to invest in Foreign Direct Investments (FDI). Horizontal FDI.
The Brainard model. Horizontal FDI and heterogenous firms (Yeaple, Melitz and Helpman 2003). Vertical FDI and country price differences (Helpmand 1984).
- Theory of the firm: Coase, Williamson and the transaction cost theory of the firm. Property rights and the theory of the firm.
The Grossman-Hart model.
Incomplete contracts, specific investments, ownership of the firm.
- Outsourcing and internationalization. Monopolistic competition, increasing returns, incomplete contracts (Antràs 2003). Incomplete contracts and heterogeneous firms (Antràs & Helpman 2003).
- Gravity equations.
- Foreign markets entry decisions: foreign distributors, strategic alliances partners, mergers and acquisitions.
During the course, other speakers will intervene:
1. academic colleagues coming from foreign universities to speak about specific topics, such as (for instance):
- Prof. Bruce McKern (University of Technology Business School, Sydney), on multinationals business models and entry modes into Chinese market;
- Prof. Raphael Chiappini (University of Bordeaux), on gravity equations;
2. business leaders, to discuss issues related to multinational firms operating in global markets.
The common theme of the business talks for the academic year 2021-22 will be ‘Internationalization and sustainability’.
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The content and the examination procedures are the same for students attending or not the course. Consistently with the content of lectures, the examination for the course includes:
I) a WRITTEN EXAM, in which students are asked to:
a) answer some open questions of trade theory and discuss a case, e.g., to comment critically current economic facts related to the course provided during the exam;
b) answer some theory questions in a multiple-choice format.
These two parts together determine the grade for the written exam.
II) In addition, students are required to prepare an ESSAY, on a case chosen by the student, developing an article of about 2000 words that must be handed in at the exam date (printed in front and in the back of white A4 paper, single-spaced, stapled without covers). The essay can be prepared in group – option recommended - in groups of 3-4 students maximum, where each student has to prepare about 2000 words. The essay should may be a critical assessment of the entry into a foreign market – already made or planned – of a firm chosen by the student (or group of students).
III) Finally, during the course students are given the opportunity to prepare a group presentation.
For the overall grade, therefore, one can add the following BONUS to the written exam:
i) Essay - mandatory. Its assessment is done on a 0-30 scale: if insufficient (<18/30), points -1; if 18-20/30, 0 points; if 21-23/30, 1 point; if 24-26/30, 2 points; if 27-30/30, 3 points.
ii) Presentation - for attending students. It gives up to 1 point.
In brief, the FINAL VOTE therefore includes:
1. the grade obtained in the written exam,
2. the bonus for the mandatory essay,
3. the bonus for the group presentation(s).
All bonuses are valid for the whole academic year 2021-22, that is, until the Fall 2022 session included.