IDEAS home Printed from https://ideas.repec.org/a/bla/obuest/v72y2010i6p744-768.html

Horizontal vs. Vertical Interdependence in Multinational Activity

Author

Listed:
  • Harald Badinger
  • Peter Egger

Abstract

type="main" xml:lang="en"> This paper sheds light on interdependencies in multinational activity that are brought about by (horizontal) trade in final goods and (vertical) trade in intermediate goods (within and between host countries). We use a panel data set of US foreign affiliate sales to 16 developed countries in seven industries over the period 1983–2000, distinguish between horizontal and vertical interdependence in multinational enterprise activity and allow for both market size (demand)-related as well as remainder linkage effects. Evidence suggests that vertical interdependence is somewhat more important than horizontal interdependence and, hence, vertical motives of multinational activity tend to dominate horizontal ones. ‘‘…both export-platform and complex-vertical motivations imply that FDI decisions are multilateral in nature…’’ ( Blonigen et al., 2007 , p. 1304)

Suggested Citation

  • Harald Badinger & Peter Egger, 2010. "Horizontal vs. Vertical Interdependence in Multinational Activity," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(6), pages 744-768, December.
    • Handle: RePEc:bla:obuest:v:72:y:2010:i:6:p:744-768
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/j.1468-0084.2010.00600.x
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Kelejian, Harry H & Prucha, Ingmar R, 1999. "A Generalized Moments Estimator for the Autoregressive Parameter in a Spatial Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 509-533, May.
    2. 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.
    3. Fukao, Kyoji & Ishido, Hikari & Ito, Keiko, 2003. "Vertical intra-industry trade and foreign direct investment in East Asia," Journal of the Japanese and International Economies, Elsevier, vol. 17(4), pages 468-506, December.
    4. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    5. Robert C. Feenstra & Gordon H. Hanson, 1999. "The Impact of Outsourcing and High-Technology Capital on Wages: Estimates For the United States, 1979–1990," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 907-940.
    6. David L. Carr & James R. Markusen & Keith E. Maskus, 2021. "Estimating The Knowledge-Capital Model of the Multinational Enterprise," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 5, pages 95-110, World Scientific Publishing Co. Pte. Ltd..
    7. Karolina Ekholm & Rikard Forslid & James R. Markusen, 2021. "Export-Platform Foreign Direct Investment," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 6, pages 111-130, World Scientific Publishing Co. Pte. Ltd..
    8. James R. MARKUSEN, 2021. "Multinationals, Multi-Plant Economies, And The Gains From Trade," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 1, pages 3-24, World Scientific Publishing Co. Pte. Ltd..
    9. Lancaster, Kelvin, 1980. "Intra-industry trade under perfect monopolistic competition," Journal of International Economics, Elsevier, vol. 10(2), pages 151-175, May.
    10. James R. Markusen & Anthony J. Venables, 2021. "The theory of endowment, intra-industry and multi-national trade," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 4, pages 69-94, World Scientific Publishing Co. Pte. Ltd..
    11. Yeaple, Stephen Ross, 2003. "The complex integration strategies of multinationals and cross country dependencies in the structure of foreign direct investment," Journal of International Economics, Elsevier, vol. 60(2), pages 293-314, August.
    12. Mayer, Thierry & Zignago, Soledad, 2006. "Notes on CEPII’s distances measures," MPRA Paper 26469, University Library of Munich, Germany.
    13. Lung-Fei Lee, 2004. "Asymptotic Distributions of Quasi-Maximum Likelihood Estimators for Spatial Autoregressive Models," Econometrica, Econometric Society, vol. 72(6), pages 1899-1925, November.
    14. Barrios, Salvador & Bertinelli, Luisito & Heinen, Andreas, 2007. "Exploring The Link Between Local And Global Knowledge Spillovers," MPRA Paper 6239, University Library of Munich, Germany.
    15. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-471, June.
    16. Baltagi, Badi H. & Egger, Peter & Pfaffermayr, Michael, 2007. "Estimating models of complex FDI: Are there third-country effects?," Journal of Econometrics, Elsevier, vol. 140(1), pages 260-281, September.
    17. Helpman, Elhanan, 1981. "International trade in the presence of product differentiation, economies of scale and monopolistic competition : A Chamberlin-Heckscher-Ohlin approach," Journal of International Economics, Elsevier, vol. 11(3), pages 305-340, August.
    18. Kapoor, Mudit & Kelejian, Harry H. & Prucha, Ingmar R., 2007. "Panel data models with spatially correlated error components," Journal of Econometrics, Elsevier, vol. 140(1), pages 97-130, September.
    19. David Greenaway & Robert Hine & Chris Milner, 1994. "Country-specific factors and the pattern of horizontal and vertical intra-industry trade in the UK," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 130(1), pages 77-100, March.
    20. Bruce A. Blonigen & Ronald B. Davies & Glen R. Waddell & Helen T. Naughton, 2019. "FDI in Space: Spatial Autoregressive Relationships in Foreign Direct Investment," World Scientific Book Chapters, in: Foreign Direct Investment, chapter 2, pages 55-88, World Scientific Publishing Co. Pte. Ltd..
    21. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
    22. Elhanan Helpman, 1985. "Multinational Corporations and Trade Structure," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(3), pages 443-457.
    23. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
    24. Harald Badinger & Peter Egger, 2009. "Estimation of Higher-Order Spatial Autoregressive Panel Data Error Component Models," CESifo Working Paper Series 2556, CESifo.
    25. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
    26. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. W. Jos Jansen & Ad C. J. Stokman, 2014. "International business cycle co-movement: the role of FDI," Applied Economics, Taylor & Francis Journals, vol. 46(4), pages 383-393, February.
    2. Jos Jansen & Ad Stokman, 2011. "International Business Cycle Comovement: Trade and Foreign Direct Investment," DNB Working Papers 319, Netherlands Central Bank, Research Department.
    3. Sophie Therese Schneider & Konstantin M. Wacker, 2022. "Explaining the global landscape of foreign direct investment: Knowledge capital, gravity, and the role of culture and institutions," The World Economy, Wiley Blackwell, vol. 45(10), pages 3080-3108, October.
    4. Yuko Hashimoto & Konstantin M. Wacker, 2012. "The Role of Risk and Information for International Capital Flows: New Evidence from the SDDS," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 124, Courant Research Centre PEG.
    5. Sotiris Blanas & Adnan Seric, 2017. "Determinants of Intra-Firm Trade," Working Papers 178118175, Lancaster University Management School, Economics Department.
    6. Christian Glocker & Matteo Iacopini & Tam'as Krisztin & Philipp Piribauer, 2023. "A Bayesian Markov-switching SAR model for time-varying cross-price spillovers," Papers 2310.19557, arXiv.org.
    7. Katharina van Treeck & Konstantin M. Wacker, 2020. "Financial globalisation and the labour share in developing countries: The type of capital matters," The World Economy, Wiley Blackwell, vol. 43(9), pages 2343-2374, September.
    8. de la Torre, Augusto & Didier, Tatiana & Pinat, Magali, 2014. "Can Latin America tap the globalization upside ?," Policy Research Working Paper Series 6837, The World Bank.
    9. Sotiris Blanas & Adnan Seric, 2018. "Determinants of intra‐firm trade: Evidence from foreign affiliates in Sub‐Saharan Africa," Review of International Economics, Wiley Blackwell, vol. 26(4), pages 917-956, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Harald Badinger & Peter Egger, 2008. "Horizontal versus Vertical Interdependence in Multinational Activity," CESifo Working Paper Series 2327, CESifo.
    2. van der Ploeg, Frederick & Poelhekke, Steven, 2010. "Do Natural Resources Attract FDI? Evidence from Non-Stationary Sector-Level Data," CEPR Discussion Papers 8079, C.E.P.R. Discussion Papers.
    3. Steven Poelhekke & Frederick Van Der Ploeg, 2009. "Foreign Direct Investment And Urban Concentrations: Unbundling Spatial Lags," Journal of Regional Science, Wiley Blackwell, vol. 49(4), pages 749-775, October.
    4. Andrzej Cieslik & Mahdi Ghodsi, 2021. "Economic sentiment indicators and foreign direct investment: Empirical evidence from European Union countries," International Economics, CEPII research center, issue 168, pages 56-75.
    5. Fritz Breuss & Peter Egger & Michael Pfaffermayr, 2010. "Structural funds, EU enlargement, and the redistribution of FDI in Europe," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 146(3), pages 469-494, September.
    6. Baltagi, Badi H. & Egger, Peter & Pfaffermayr, Michael, 2008. "Estimating regional trade agreement effects on FDI in an interdependent world," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 194-208, July.
    7. Naoto Jinji & Xingyuan Zhang & Shoji Haruna, 2022. "Deep Integration, Global Firms, and Technology Spillovers," Advances in Japanese Business and Economics, Springer, number 978-981-16-5210-3, April.
    8. Baltagi, Badi H. & Egger, Peter & Pfaffermayr, Michael, 2007. "Estimating models of complex FDI: Are there third-country effects?," Journal of Econometrics, Elsevier, vol. 140(1), pages 260-281, September.
    9. Stephen G. Hall & Pavlos Petroulas, 2008. "Spatial Interdependencies of FDI Locations: A Lessening of the Tyranny of Distance?," Discussion Papers in Economics 08/28, Division of Economics, School of Business, University of Leicester.
    10. Steven Poelhekke, 2011. "Home Bank Intermediation of Foreign Direct Investment," CESifo Working Paper Series 3490, CESifo.
    11. Chakraborty, Suparna & Wang, Miao Grace & Wong, M. C. Sunny, 2025. "From globalization to glocalization: Cultural interdependence as a source of FDI motivation," Research in Economics, Elsevier, vol. 79(1).
    12. Okubo, Toshihiro & Watabe, Yuta, 2023. "Networked FDI and third-country intra-firm trade," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 591-606.
    13. Laura Alfaro & Maggie Xiaoyang Chen, 2018. "Transportation cost and the geography of foreign investment," Chapters, in: Bruce A. Blonigen & Wesley W. Wilson (ed.), Handbook of International Trade and Transportation, chapter 12, pages 369-406, Edward Elgar Publishing.
    14. Antrà s, Pol & Yeaple, Stephen R., 2014. "Multinational Firms and the Structure of International Trade," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 55-130, Elsevier.
    15. Harald Badinger & Peter Egger, 2017. "Spacey Parents and Spacey Hosts in Foreign Direct Investment," Economica, London School of Economics and Political Science, vol. 84(335), pages 480-497, July.
    16. Escobar Gamboa, Octavio Romano, 2009. "IDE entrants, exportations et productivité manufacturière : les différentes performances des régions mexicaines," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/3850 edited by Guillochon, Bernard.
    17. Elhanan Helpman, 2014. "Foreign Trade and Investment: Firm-level Perspectives," Economica, London School of Economics and Political Science, vol. 81(321), pages 1-14, January.
    18. Jaime Martínez-Martín, 2011. "General equilibrium long-run determinants for Spanish FDI: a spatial panel data approach," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 2(3), pages 305-333, September.
    19. Petr Mariel & Susan Orbe & Carlos Rodríguez, 2009. "The Knowledge‐Capital Model Of Fdi: A Time Varying Coefficients Approach," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(2), pages 196-212, May.
    20. Chen, Maggie Xiaoyang & Moore, Michael O., 2010. "Location decision of heterogeneous multinational firms," Journal of International Economics, Elsevier, vol. 80(2), pages 188-199, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:obuest:v:72:y:2010:i:6:p:744-768. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/sfeixuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.