Intrafirm Trade of US MNCs: Findings and Implications for Models and Policies Toward Trade and Investment

Researchers have found mixed results on whether FDI generates positive spillovers that improve the efficiency of host country economies. We argue that these inconclusive results may be due (in part) to the substantial heterogeneity in MNC affiliate activity, which prior research has largely ignored. We examine one important source of heterogeneity - whether an affiliate is organized to trade intra-firm. In a descriptive analysis of affiliate activity in 49 developing countries from 1983 to 1996, we find that MNC affiliates that are organized to trade intra-firm differ in important ways from those that are note: They pay higher wages, they experience higher growth in PPE, and they are considerably more dynamic technologically.