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Horizontal vs. Vertical Interdependence in Multinational Activity

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  • 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)

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  • 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
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    File URL: http://hdl.handle.net/10.1111/j.1468-0084.2010.00600.x
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    3. Ms. Yuko Hashimoto & Mr. Konstantin Wacker, 2012. "The Role of Risk and Information for International Capital Flows: New Evidence from the SDDS," IMF Working Papers 2012/242, International Monetary Fund.
    4. Jos Jansen & Ad Stokman, 2011. "International Business Cycle Comovement: Trade and Foreign Direct Investment," DNB Working Papers 319, Netherlands Central Bank, Research Department.
    5. 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.
    6. Sotiris Blanas & Adnan Seric, 2017. "Determinants of Intra-Firm Trade," Working Papers 178118175, Lancaster University Management School, Economics Department.
    7. 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.
    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.

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