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Inter-Country Exchange Rates and Intra-Firm Trade Flow Within Global Network of Multinational Corporations

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  • Sangcheol Song

    (Saint Joseph’s University)

Abstract

This study examines how effectively multinational corporations (MNCs) respond to changing external environments by intra-firm shifts of products under the influence of divergent currency changes among countries. We test main hypotheses using a panel dataset of Korean FDI and feasible generalized least square model on STATA 10. We find that more counterpart affiliates with opposite directional exchange rate change, lower transportation costs of product shipping, lower labor cost growth rates, and higher portfolio ownership control are positively associated with the subsidiary’ intra-firm sales. By examining the actual mechanisms whereby MNCs can realize operational flexibility through intra-firm trade among their foreign subsidiaries, this study extends the multinational operational flexibility literature. We show that the magnitude of intra-firm trades within the MNC’s subsidiary network reflects the level of its operational flexibility.

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  • Sangcheol Song, 2015. "Inter-Country Exchange Rates and Intra-Firm Trade Flow Within Global Network of Multinational Corporations," Management International Review, Springer, vol. 55(1), pages 1-22, February.
    • Handle: RePEc:spr:manint:v:55:y:2015:i:1:d:10.1007_s11575-014-0233-4
    DOI: 10.1007/s11575-014-0233-4
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    Cited by:

    1. Song, Sangcheol, 2021. "Do in-network ties help in lowering subsidiary divestment rates under environmental challenges?," Journal of Business Research, Elsevier, vol. 128(C), pages 257-265.
    2. Song, Sangcheol, 2022. "Cultural diversification, human resource-based coordination, and downside risks of multinationality," Journal of Business Research, Elsevier, vol. 142(C), pages 562-571.
    3. Christofi, Michael & Pereira, Vijay & Vrontis, Demetris & Tarba, Shlomo & Thrassou, Alkis, 2021. "Agility and flexibility in international business research: A comprehensive review and future research directions," Journal of World Business, Elsevier, vol. 56(3).
    4. Song, Sangcheol, 2021. "When do multinational corporations adjust production volume flexibly among in-network subsidiaries?," Journal of Business Research, Elsevier, vol. 135(C), pages 532-542.
    5. KATO Atsuyuki, 2019. "Exchange Rates and Intra- and Inter-Firm Trade in Japan," Discussion papers 19082, Research Institute of Economy, Trade and Industry (RIETI).
    6. Hoso, Jasmin, 2016. "Empirical Analysis Of Demand For Roof Tiles: Example Of Tondach Company," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 7(1), pages 61-70.

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