International Fragmentation of Production and the Intrafirm Trade of U.s. Multinational Companies
An aspect of globalization that has attracted increased attention in recent years is trade in intermediate inputs associated with the fragmentation of production across national borders. This trade takes the form of intrafirm transactions when production stages in different countries are performed by vertically integrated units of a multinational firm. Using firm-level data on U.S. multinational companies collected by the U.S. Bureau of Economic Analysis, this paper examines intrafirm shipments of intermediate inputs from U.S. parent companies to their foreign manufacturing affiliates. We relate the propensity of affiliates to source intermediate inputs from their parents to characteristics of the parent company, of the affiliate, and of the affiliate’s host country and industry that we hypothesize will influence the volume of intrafirm trade associated with fragmentation. Our results indicate that this trade is positively related to industry and affiliate characteristics that suggest fragmented production, to host-country characteristics that offer cost advantages, and to parent and affiliate characteristics that favor internalized transactions and the active coordination of different stages of the production process. The signs on the coefficients for a number of variables suggest a division of labor between higher-skilled, or more technologically advanced, activities performed by the parent and lower-skilled, or more rudimentary, activities performed by the affiliate.
|Date of creation:||Jan 2004|
|Date of revision:|
|Contact details of provider:|| Phone: 202-482-4883|
Web page: http://www.bea.gov/research/index.htm
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Andersson, Thomas & Fredriksson, Torbjorn, 2000. "Distinction between intermediate and finished products in intra-firm trade," International Journal of Industrial Organization, Elsevier, vol. 18(5), pages 773-792, July.
- 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, Oxford University Press, vol. 114(3), pages 907-940.
- Robert C. Feenstra, .
"Integration Of Trade And Disintegration Of Production In The Global Economy,"
Department of Economics
98-06, California Davis - Department of Economics.
- Robert C. Feenstra, 1998. "Integration of Trade and Disintegration of Production in the Global Economy," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 31-50, Fall.
- Robert Feenstra, 2003. "Integration Of Trade And Disintegration Of Production In The Global Economy," Working Papers 986, University of California, Davis, Department of Economics.
- Zhang, Kevin Honglin & Markusen, James R., 1999.
"Vertical multinationals and host-country characteristics,"
Journal of Development Economics,
Elsevier, vol. 59(2), pages 233-252, August.
- Kevin H. Zhang & James R. Markusen, 1997. "Vertical Multinationals and Host-Country Characteristics," NBER Working Papers 6203, National Bureau of Economic Research, Inc.
- Salvatore Baldone & Fabio Sdogati & Lucia Tajoli, 2001. "Patterns and determinants of international fragmentation of production: Evidence from outward processing trade between the EU and Central Eastern European countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 137(1), pages 80-104, March.
- Peter J Buckley & R D Pearce, 1979. "Overseas Production and Exporting by the World's Largest Enterprises: A Study in Sourcing Policy," Journal of International Business Studies, Palgrave Macmillan, vol. 10(1), pages 9-20, March.
When requesting a correction, please mention this item's handle: RePEc:bea:papers:0035. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bryn Whitmire)
If references are entirely missing, you can add them using this form.