Language, ethnicity and intrafirm trade
AbstractWe study the significant variation in intrafirm versus arm's-length trade with micro data. Exploiting the fact that Korean is an uncommon second language and that Korean culture is relatively homogenous, we show how intrafirm sourcing by South Korean affiliates abroad increases with their share of South Korean employees. This positive association is pervasive and nontrivial. Parsing the data more carefully, we find that South Korean employees are primarily high skilled, and that their presence matters for internal trade, not for trade with South Korea per se. The share of South Koreans is also higher in affiliates from nonroutine sectors in host countries that are culturally distant from South Korea. Our empirical evidence thus supports especially Bergrstrand and Egger (2011)'s view of multinational in-house production for nonroutine activities that require adaptation and internal communication.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Development Economics.
Volume (Year): 103 (2013)
Issue (Month): C ()
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Multinationals; Intrafirm trade; Arm's-length trade; Cultural distance;
Other versions of this item:
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- F10 - International Economics - - Trade - - - General
- F20 - International Economics - - International Factor Movements and International Business - - - General
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