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The determinants of intrafirm trade: Evidence from French firms

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Author Info

  • Corcos, G.
  • Irac, D.
  • Mion, G.
  • Verdier, T.

Abstract

How well does the theory of the firm explain the choice between intrafirm and arms' length trade? This paper uses firm-level import data from France to look into this question. We find support for three key predictions of property-rights theories of the multinational firm. Intrafirm imports are more likely: (i) in capital- and skill-intensive firms; (ii) in highly productive firms; (iii) from countries with well-functioning judicial institutions. We further bridge previous aggregate findings with our investigation by decomposing intrafirm imports into an extensive and intensive margin. Doing so we uncover interesting patterns in the data that require further theoretical investigation.

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Bibliographic Info

Paper provided by Banque de France in its series Working papers with number 362.

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Length: 38 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:bfr:banfra:362

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Postal: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
Web page: http://www.banque-france.fr/
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Keywords: intrafirm trade; outsourcing; firm heterogeneity; incomplete contracts; internationalization strategies; quality of institutions; extensive margin; intensive margin.;

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References

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  1. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, December.
  2. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2007. "Estimating Trade Flows: Trading Partners and Trading Volumes," NBER Working Papers 12927, National Bureau of Economic Research, Inc.
  3. Nunn, Nathan, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," Scholarly Articles 4686801, Harvard University Department of Economics.
  4. Ethier, W.J. & Markusen, J.R., 1993. "Multinational Firms, Technology Diffusion and Trade," ISER Discussion Paper 0303, Institute of Social and Economic Research, Osaka University.
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  6. Carluccio, J. & Fally, T., 2011. "Global Sourcing under Imperfect Capital Markets," Working papers 312, Banque de France.
  7. Andrew B. Bernard & J. Bradford Jensen & Stephen Redding & Peter K. Schott, 2010. "Intra-Firm Trade and Product Contractibility (Long Version)," CEP Discussion Papers dp0978, Centre for Economic Performance, LSE.
  8. Eiichi Tomiura, 2005. "Foreign Outsourcing, Exporting, and FDI: A Productivity Comparison at the Firm Level," Discussion Paper Series 168, Research Institute for Economics & Business Administration, Kobe University.
  9. Fabrice Defever & Farid Toubal, 2007. "Productivity and the sourcing modes of multinational firms: evidence from French firm-level data," LSE Research Online Documents on Economics 19655, London School of Economics and Political Science, LSE Library.
  10. Ignatius Horstmann & James R. Markusen, 1987. "Licensing versus Direct Investment: A Model of Internalization by the Multinational Enterprise," Canadian Journal of Economics, Canadian Economics Association, vol. 20(3), pages 464-81, August.
  11. Lafontaine, Francine & Slade, Margaret, 2007. "Vertical Integration and Firm Boundaries : The Evidence," The Warwick Economics Research Paper Series (TWERPS) 799, University of Warwick, Department of Economics.
  12. Ranjan, Priya & Tobias, Justin, 2007. "Bayesian Inference in the Gravity Model," Staff General Research Papers 12721, Iowa State University, Department of Economics.
  13. Wilhelm Kohler & Marcel Smolka, 2009. "Global Sourcing Decisions and Firm Productivity: Evidence from Spain," CESifo Working Paper Series 2903, CESifo Group Munich.
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Citations

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Cited by:
  1. Lucia Pérez-Villar & Adnan Seric, 2014. "Multinationals in Sub-Saharan Africa: Domestic Linkages and Institutional Distance," Kiel Working Papers 1893, Kiel Institute for the World Economy.
  2. Helpman, Elhanan, 2013. "Foreign Trade and Investment: Firm-Level Perspectives," CEPR Discussion Papers 9482, C.E.P.R. Discussion Papers.
  3. Alireza Naghavi & Julia Spies & Farid Toubal, 2013. "Intellectual Property Rights, Product Complexity, and the Organization of Multinational Firms," CESifo Working Paper Series 4430, CESifo Group Munich.
  4. Nowak, Verena & Schwarz, Christian & Suedekum, Jens, 2014. "Asymmetric spiders: Supplier heterogeneity and the organization of firms," DICE Discussion Papers 141, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  5. João Amador & Sónia Cabral, 2014. "Global Value Chains: Surveying Drivers, Measures and Impacts," Working Papers w201403, Banco de Portugal, Economics and Research Department.
  6. Kohler, Wilhelm & Smolka, Marcel, 2013. "Global Sourcing: Towards an Empirical Test of the Hold-up Model," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80049, Verein für Socialpolitik / German Economic Association.
  7. Egger, Peter & Seidel, Tobias, 2013. "Corporate taxes and intra-firm trade," European Economic Review, Elsevier, vol. 63(C), pages 225-242.
  8. Kohler, Wilhelm & Smolka, Marcel, 2013. "Global sourcing and firm selection," University of Tuebingen Working Papers in Economics and Finance 63, University of Tuebingen, Faculty of Economics and Social Sciences.

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