Abstract:
"Internalization theory" has been held high in the literature on foreign direct investment and intrafirm trade. This paper empirically examines the strength of this theory in distinguishing U.S. intrafirm exports from its arms-length counterpart. Using dummy variable specifications, it estimates "differences" in the relationship between traditional trade variables and the two different types of export trade across 249 manufacturing industries. It has the advantage of using confidential line-of-business data from the U.S. Federal Trade Commission data bank. At the industry level, results suggest weak support for "internalization theory" as an effective discriminating model of intrafirm exports. Copyright 1990 by MIT Press.