…assets (Markusen, 1984; 2002), the advantages of horizontal (Horstmann and Markusen, 1992; Markusen and Venables, 2000) and vertical integration (Aghion and Tirole, 1997; Grossman and Hart, 1986), and the advantages of subcontracting and licensing versus FDI (Ethier and Markusen, 1996; Helpman…