The Determinants of Intrafirm Trade: Evidence from French Firms

Abstract

Abstract-How well does the theory of the firm explain the choice between intrafirm and arm's-length trade? This paper uses firm-level import data from France to look into this question. We find support for three key predictions of property rights theories of the multinational firm. Intrafirm imports are more likely in capital-and skill-intensive firms, in highly productive firms, and from countries with well-functioning judicial institutions. We bridge previous aggregate findings with our investigation by decomposing intrafirm imports into an extensive and intensive margin and uncover interesting patterns in the data that require further theoretical investigation.

Determinants of intra‐firm trade: Evidence from foreign affiliates in Sub‐Saharan Africa

“…First, foreign affiliates with intra-firm trade are relatively few as they account for only 36 percent of the whole sample of trading firms. This is consistent with recent evidence on the relatively low shares of affiliated parties that trade with each other across borders (Corcos et al, 2013;Ramondo et al, 2016) and within borders (Atalay et al, 2014). Second, the vast majority of foreign affiliates with intra-firm trade engage in arm's length trade as well.…”

“…First, in addition to previously examined firm-level determinants of intra-firm trade such as employment (Ramondo, Rappoport, & Ruhl, 2016), productivity, skill intensity and capital intensity (Corcos, Irac, Mion, & Verdier, 2013), the richness of our dataset allows us to look into the potential role of many other characteristics of foreign affiliates in intra-firm trade. In particular, we consider their intangible intensity, their status as majority-owned foreign affiliates (MOFAs), their age, their creation as mergers and acquisitions (M&As), their principal business scope (e.g., market or input access), their shares of finance of working capital from various sources including the parent company, and their tax to sales ratio.…”

“…Focusing on MNCs in this region is particularly important for two main reasons. The first reason is that the determinants of intra-firm trade have been studied so far only with the use of data on developed countries, namely the United States (Antr as, 2003;Nunn & Trefler, 2013;Atalay, Hortacsu, & Syverson, 2014;Ramondo et al, 2016) and France (Corcos et al, 2013). The second reason is that the African continent, despite lagging behind other developing regions such as South-East Asia and Latin America in terms of FDI inflows, has experienced a remarkable increase in this regard in recent decades.…”

Global Value Chains: A Survey of Drivers and Measures

“…The modes of governance in this database include vertical FDI, partnership and international outsourcing from a independent party. Corcos et al (2013) find that intra-firm trade is more likely in capital-and skill-intensive firms, in more productive firms and from countries with well-functioning judicial institutions. On the contrary, Jabbour (2012) finds that more productive firms tend to outsource through arm's-length transactions, while less productive firms integrate vertically.…”

“…Some recent studies on the mode of internationalization of firms, like Defever and Toubal (2013), Jabbour (2012) and Corcos et al (2013), use data from the survey on the foreign activities of French industrial multinationals carried out in 1999 (Enquête sur lesÉchanges Internationaux Intra-Groupe). For each import transaction, there is information on the value, the classification of the imported product, the country of origin as well as the mode of governance of the transaction.…”