The Determinants of Intra-Firm Trade

This paper analyzes the determinants of the intra-firm vs arms’length sourcing mode of imported inputs. We build a unique French dataset of 1,141,393 import transactions at the firm, country and product levels in the year 1999 that allow us to distinguish the different sourcing modes. We study the firms-, country- and product- determinants of intra-firm trade. We confirm a number of theory-based predictions building on the residuals property rights approach and provide some empirical facts that can be used to further refine this as well as alternative theories. In particular, we highlight the fact that firms’ heterogeneity needs to be evaluated across different dimensions. Furthermore, we point out that complex goods are more likely to be produced within the firm boundaries suggesting that those material and immaterial attributes that characterized a product play a key role in globalized sourcing strategies.Internationalization strategies; intra-firm trade; outsourcing; firm heterogeneity

The Determinants of Intrafirm Trade: Evidence from French Firms

How well does the theory of the firm explain the choice between intrafirm and arms' 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: (i) in capital- and skill-intensive firms; (ii) in highly productive firms; (iii) from countries with well-functioning judicial institutions. We further bridge previous aggregate findings with our investigation by decomposing intrafirm imports into an extensive and intensive margin. Doing so we uncover interesting patterns in the data that require further theoretical investigation.intrafirm trade, outsourcing, firm heterogeneity, incomplete contracts, internationalization strategies, quality of institutions, extensive margin, intensive margin

The Determinants of Intrafirm Trade

Abstract This paper analyzes the determinants of the sourcing mode of imported inputs at the firm level. We exploit a unique French dataset of 1,141,393 import transactions spanning across firm, countries and products in 1999, where we observe whether a transaction is intra-firm or at arms' length. We first study which firm-, country-and product-specific factors affect the 'make or buy' choice at the firm level (extensive margin). We confirm a number of theoretical predictions of property-rights models, and provide a number of empirical facts that can be used to refine theory. We finally compare our results with previous findings on more aggregated data, highlighting the importance of separating the extensive and intensive margins of imports. Keywords: intra-firm trade; outsourcing; firm heterogeneity; incomplete contracts; internationalization strategies; quality of institutions, extensive margin, intensive margin

The determinants of intrafirm trade: evidence from French firms

How well does the theory of the firm explain the choice between intrafirm and arms' 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: (i) in capital- and skill-intensive firms; (ii) in highly productive firms; (iii) from countries with well-functioning judicial institutions. We further bridge previous aggregate findings with our investigation by decomposing intrafirm imports into an extensive and intensive margin. Doing so we uncover interesting patterns in the data that require further theoretical investigation

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