THE PATTERN OF INTRA‐FIRM EXPORTS BY U.S. MULTINATIONALS*

Published date01 August 1978
Date01 August 1978
DOIhttp://doi.org/10.1111/j.1468-0084.1978.mp40003002.x
THE PATTERN OF INTRA-FIRM EXPORTS BY
U.S. MULTINATIONALS*
By SANJAYA LALL
I. INTRODUCTION
This paper reports on an attempt to explain inter-industry differences in the
pattern of intra-firm exports (exports from parent MNCs to affiliates abroad) by
U.S. manufacturing firms in 1970. The growth of intra-firm exports of manu-
factures in the past two decades has been noted with interest in the literature,
though much of this interest has centred on the possibilities of transfer price
manipulation by MNCs.' No serious effort has, to my knowledge, yet been made
to examine the economic factors which account for the wide inter-industry
differences observed in the propensity to use intra-firm rather than unrelated-
party (or 'open market') trade, despite the significance of these differences for
understanding MNC strategy and for formulating policies to deal with the potential
dangers of transfer price manipulation.2
Two factors place handicaps in the way of such an examination. First, there
is little theory which deals specifically with this problem; conventional trade
theory, which does not distinguish betwen inter- and intra-firm trade, certainly
offers little guidance. The study of vertical integration in industrial economics
comes closest to analysing the factors that account for the pattern of intra-firm
trade, but we need to supplement it with considerations specific to the operations
of MNCs, where 'vertical integration' in the form of common ownership already
exists and where the international nature of the phenomenon adds a new set of
influences. Second, and more significantly, data on intra-firm trade are scarce,
and those that are published are highly aggregated.3 Thus a detailed investiga-
tion which deals with specific products, arguably the ideal level of analysis, cannot
be undertaken.
The present study suffers from both handicaps, and its limitations must be
acknowledged at the start. It is, however, hoped that what does emerge is of
interest, and that this preliminary attempt will lead to further investigation. We
proceed as follows: section II describes some relevant characteristics of intra-firm
exports for the U.S.; section III discusses factors that may be expected to account
for inter-industry differences in intra-firm trade; section IV describes the variables;
and section V gives the results of the empirical tests.
II. INTRA-FIRM EXPORTS BY U.S. MNCs
In an earlier paper (Lall (1973)) I traced the growth of intra-firm trade by U.S.
firms from 1962 to 1970, and noted difficulties in comparing figures for different
J am very grateful to Gerry Helleiner and John Knight for helpful comments on an
earlier draft.
1 See, for instance, LaB (1973).
2The relevance of these considerations for policy-makers in less-developed countries is
discussed at greater length in Lau (1978).
See U.S. Tariff Commission (1973). 209

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