ABSTRACT
Only a very small handful of the world’s largest banks are located in the United States. Most
of the very largest banking institutions, which engage in significant cross-border trade in
financial services, are based in countries such as Japan, France, Germany, Switzerland, and
the United Kingdom. Why is it that the bulk of the world’s most massive banks are located in
these nations with relatively smaller economies? In this chapter, you will learn that for many
firms, operating most cost-efficiently requires growing beyond the borders of the nation in
which an industry is based. You will also learn that the tendency for firms to expand beyond
their borders in an effort to reduce their expenses can help to explain intra-industry trade-
cross-border exchanges of goods or services that are close substitutes.
