“…1 Empirically, most recent studies based on the predictions generated by the knowledge-capital model find that differences in skilled-labour endowments deter multinational activity and confirm Brainard's (1997) result that most FDI appears to be of the horizontal type (Carr et al, 2001(Carr et al, , 2003Markusen and Maskus, 2002;Blonigen et al, 2003;Blonigen, 2005). Support for the vertical model, on the other hand, is rather limited, although a few authors have found some (Davies, 2002;Yeaple, 2003;Waldkirch, 2004;Braconier et al, 2005a). The most commonly used data source in empirical work comes from the US Bureau of Economic Analysis (BEA) and consists of US inbound and outbound observations.…”