Trade Openness and Vertical Integration: Evidence from Korean Firm-Level Data

Hea-Jung Hyun and Jung Hur

No 09-8, Working Papers from Korea Institute for International Economic Policy

Abstract: Using firm-level data on vertical integration of Korean manufacturers, the paper tests whether trade liberalization is an important determinant of firm's decision on vertical integration. We develop an empirical framework incorporating trade openness into industrial organization models; transaction costs theory and theory of internal costs of management. The empirical results of the paper suggest that trade openness is negatively related with vertical integration. A further analysis on firm's decision among four types of organizational forms in international contexts, however, reveals that trade liberalization has positive impact on cross-border vertical integration while it is negatively correlated with domestic vertical integration.

Keywords: Vertical Integration; Trade Liberalization; Transaction Costs; Internal Cost Of Management (search for similar items in EconPapers)
JEL-codes: D23 F23 L22 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2009-12-30
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Citations: View citations in EconPapers (2)

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