  In this contribution, we investigate the role of ownership chains developed
by multinational enterprises across different national borders. First, we
document that parent companies control a majority (58%) of foreign subsidiaries
through indirect control relationships involving at least two countries along
an ownership chain. Therefore, we hypothesize that locations along ownership
chains are driven by the existence of communication costs to transmit
management decisions. In line with motivating evidence, we develop a
theoretical model for competition on corporate control that considers the
possibility that parent companies in the origin countries can delegate their
monitoring activities in final subsidiaries to middlemen subsidiaries that are
located in intermediate jurisdictions. Our model returns us a two-step
empirical strategy with two gravity equations: i) a triangular gravity for
establishing a middleman by the parent, conditional on final investments'
locations; ii) a classical gravity for the location of final investments. First
estimates confirm the predictions that ease of communication at the country
level shapes the heterogeneous locations of subsidiaries along global ownership
chains.
