The knowledge transfer patterns of multinational firms: The evidence from Korean firm-level analysis

This paper examines one of the theoretical hypotheses of Keller and Yeaple (2013) in order to investigate how trade costs and the level of firm-level knowledge intensity of a parent firm affect its knowledge transfer to foreign affiliates. Specifically, we focus on Keller and Yeaple (2013)’s second prediction that the share of intra-firm imports from the parent declines in trade costs, but this decline is weaker in knowledge-intensive settings. Using a panel of Korean manufacturing firms over 2007–2018, we separate knowledge transfer into (a) knowledge-embedded intra-firm trade and (b) direct communication (human resource secondments). We then analyze the role of trade costs and knowledge intensity on each channel via fixed effects and dynamic panel estimations. We find that trade costs significantly reduce intra-firm exports of knowledge-embedded inputs; however, a higher knowledge intensity mitigates this effect. On the other hand, trade costs and knowledge intensity do not exert a significant influence on direct communication.