Cross-border Vertical Integration and Intra-firm Trade: New evidence from Korean and Japanese firm-level data

Author Name Hyunbae CHUN (Sogang University) / Jung HUR (Sogang University) / Young Gak KIM (Senshu University) / Hyeog Ug KWON (Faculty Fellow, RIETI)
Creation Date/NO. March 2017 17-E-049
Research Project East Asian Industrial Productivity
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This paper gives two findings about the cross-border vertical integration and intra-firm trade of firms in Korean and Japanese manufacturing industries. First, the intra-firm trade between a parent firm and its affiliates is highly concentrated in a small number of large multinational corporations. Second, the input-output coefficient between the parent firm's industry and the affiliate's industry is weakly related to the presence and magnitude of intra-firm trade between the parent firm and its affiliates. Furthermore, these two findings are also found in domestic vertically integrated firms. In particular, the second fact casts doubt on the traditional view of the cost-saving motive of vertical multinational firms and indicates the need for further investigation on a new motive for cross-border vertical integration.

Published: Chun, Hyunbae, Jung Hur, Young Gak Kim, and Hyeog Ug Kwon, 2017. "Cross-border vertical integration and intra-firm trade: New evidence from Korean and Japanese firm-level data," Asian Economic Papers, Vol. 16(2), pp. 126-139