Intra-firm trade and contract completeness: Evidence from Japanese foreign-affiliated firms

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

The issue on growth and its variations of the intra-firm trade of intermediate inputs are of great interest in international economics. Recently, many economists have stepped forward to explain this issue. However, traditional trade theory cannot explain the choice between intra-firm trade with vertical integration and international outsourcing. Thus, researchers are motivated to incorporate the concepts from industrial organization and contract theory to explain the organizational structure of firms. Using micro data at the affiliate-firm level, this chapter examines the determinants of intra-firm trade by shedding light not only on factor prices and trade costs but also on organizational structure in terms of the ownership of overseas plants and the control over intermediate inputs for further processing. Since organizational structure and intra-firm trade are jointly determined, we adopt instrumental variable (IV) regressions into our analysis and treat the choice of purchasing managers as an endogenous variable. The results suggest that the control over input decisions critically affects the intra-firm trade of intermediate inputs.

Original languageEnglish
Title of host publicationInternationalization of Japanese Firms
Subtitle of host publicationEvidence from Firm-level Data
PublisherSpringer Japan
Pages151-169
Number of pages19
Volume9784431545323
ISBN (Electronic)9784431545323
ISBN (Print)443154531X, 9784431545316
DOIs
Publication statusPublished - 2014 Dec 1

Keywords

  • Incomplete contracts
  • Intra-firm trade
  • Organizational structure
  • Ownership and control

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)
  • Business, Management and Accounting(all)

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  • Cite this

    Matsuura, T., & Ito, B. (2014). Intra-firm trade and contract completeness: Evidence from Japanese foreign-affiliated firms. In Internationalization of Japanese Firms: Evidence from Firm-level Data (Vol. 9784431545323, pp. 151-169). Springer Japan. https://doi.org/10.1007/978-4-431-54532-3_8