We examine the general-equilibrium effects of overseas brand creation and subsidies in a monopolistically competitive sector that produces differentiated products with subcontracting production. We find that the marketing effect on overseas demand, the subcontracted quantity effect and the business-stealing effect are crucial factors, which enable us to obtain the following conclusions. First, building up new brand abroad raises the price ratio, the subcontracted quantity and the number of varieties, while lowers the firm's output of final use in the host country under the condition that the marketing effect on overseas demand is sufficiently strong. Second, given the condition that the marketing effect on overseas demand is sufficiently strong, the government ought to provide subsidies to overseas brand creation if the subcontracted quantity effect or the business-stealing effect is sufficiently strong.
