This dissertation, "Essays on Multinational Enterprises" by Yi, Lu, 陸毅, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract: Abstract of the thesis entitled Essays on Multinational Enterprises Submitted by Yi LU for the degree of Doctor of Philosophy at the University of Hong Kong in September 2007 The world economy has witnessed a continuous trend of globalization since the late 1980s: the value of world exports reached US$6.6 billion in 2003, about one sixth of the world's total GDP. Multinational enterprises have played an important role in this wave of globalization. At the macro-level, the world-wide real inflows of FDI increased by 17.7% during the period 1985-1999, far outpacing the growth of GDP and trade which increased by 2.5% and 5.6%, respectively (Barba-Navaretti and Venables, 2004); while at the micro-level, foreign-owned multinational enterprises currently employ one fifth of workers in European manufacturing industries and one seventh in their counterparts in the U.S.; they sell one euro in every four of manufactured goods in Europe and one dollar in every five in the US (OECD, 2001). Along with the increasing importance of multinational enterprises in international trade, studies on multinational enterprises have recently mushroomed in international economics. They apply the theory of the firm, i.e. the property rights theory (Grossman and Hart, 1986) to understanding the behavior of multinational enterprises, and employ the newly available reliable firm-level datasets to conduct empirical research. This thesis contributes to this growing literature by studying two aspects of the business strategies of multinationals. Much evidence shows that multinational enterprises conduct bi-sourcing in organizing production, i.e., acquiring the same set of inputs by both buying from external suppliers (outsourcing) and producing in component-manufacturing subsidiaries (insourcing). The first chapter of this thesis shows that, by adopting the bi-sourcing strategy, multinational enterprises can use the payoff from one supplier as a backup option in negotiating with the other supplier (the cross-threat effect). Moreover, in the global economy consisting of high-waged North and low-waged South, multinational enterprises need to make the location choice for both insourcing and outsourcing. We find that the low wage in the South can stimulate the investment incentive of component suppliers (the cost effect). However, multinational enterprises may achieve better cross-threat effect by relocating overly strong component suppliers from the advantageous South to the disadvantageous North (the balancing effect). The Ioptimal bi-sourcing strategy is determined by the interplay of the cost effect and the balancing effect. Meanwhile, globalization enables multinational enterprises to organize production around the world, through which they can find the most efficient locations for each production stage. Thus, it is important to understand what affects the location choice made by multinational enterprises. The second chapter of this thesis examines the impacts of economic institutions, including property rights protection and contract enforcement, on the location choice of foreign direct investment. From a data set of 6,288 U.S. multinationals investing in various China's regions in the period 1993-2001, it is found that U.S. multinationals prefer to invest in those regions that have better protection of intellectual property rights, a lower degree of government intervention in business operations, a lower le