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Trade Openness and Vertical Integration: Evidence from Korean Firm-Level Data


  • Hyun , Hea-Jung

    () (Korea Institute for International Economic Policy)

  • Hur , Jung

    () (Sogang University)


Using firm-level data on vertical integration of Korean manufacturers, the paper tests whether trade liberalization is an important determinant of firm's decision on vertical integration. We develop an empirical framework incorporating trade openness into industrial organization models; transaction costs theory and theory of internal costs of management. The empirical results of the paper suggest that trade openness is negatively related with vertical integration. A further analysis on firm's decision among four types of organizational forms in international contexts, however, reveals that trade liberalization has positive impact on cross-border vertical integration while it is negatively correlated with domestic vertical integration.

Suggested Citation

  • Hyun , Hea-Jung & Hur , Jung, 2009. "Trade Openness and Vertical Integration: Evidence from Korean Firm-Level Data," Working Papers 09-8, Korea Institute for International Economic Policy.
  • Handle: RePEc:ris:kiepwp:2009_008

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    Cited by:

    1. Emanuel Ornelas & John L. Turner, 2012. "Protection and International Sourcing," Economic Journal, Royal Economic Society, vol. 122(559), pages 26-63, March.

    More about this item


    Vertical Integration; Trade Liberalization; Transaction Costs; Internal Cost Of Management;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure


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