We develop an integrated theoretical model of international production and trade that differentiates domestic production and entity production. We then assess the effects of wealth and productivity on investment returns and investment flows between economies in global production chains in this analytical framework. It is found that it is the productivity at the destination country that matters in generating higher investment returns for home country firms, where multinational enterprises are incentivized to operate and perform multinational production. While capital flows from countries high in endowment of capital to countries in need of capital, it is coupled with sluggish productivity growth in home countries looking for productivity boosts elsewhere. The study reveals how and where MNEs would operate and conduct production, in relation to levels of wealth and productivity, taking in the effects of productivity catch-up and productivity transfers.