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Horizontal vs. Vertical Interdependence in Multinational Activity *
Author(s) -
Badinger Harald,
Egger Peter
Publication year - 2010
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/j.1468-0084.2010.00600.x
Subject(s) - multinational corporation , horizontal and vertical , interdependence , vertical integration , panel data , horizontal integration , international trade , linkage (software) , foreign direct investment , international economics , business , economics , economic geography , industrial organization , geography , marketing , econometrics , political science , biochemistry , chemistry , macroeconomics , geodesy , finance , law , gene
This paper sheds light on interdependencies in multinational activity that are brought about by (horizontal) trade in final goods and (vertical) trade in intermediate goods (within and between host countries). We use a panel data set of US foreign affiliate sales to 16 developed countries in seven industries over the period 1983–2000, distinguish between horizontal and vertical interdependence in multinational enterprise activity and allow for both market size (demand)‐related as well as remainder linkage effects. Evidence suggests that vertical interdependence is somewhat more important than horizontal interdependence and, hence, vertical motives of multinational activity tend to dominate horizontal ones. ‘‘… both export‐platform and complex‐vertical motivations imply that FDI decisions are multilateral in nature …’’ (Blonigen et al. , 2007, p. 1304)