Publications
Publications
- December 2009
- American Economic Review
Intra-Industry Foreign Direct Investment
By: Laura Alfaro and Andrew Charlton
Abstract
We use a new firm-level dataset that establishes the location, ownership, and activity of 650,000 multinational subsidiaries. Using a combination of four-digit-level information and input-output tables, we find the share of vertical FDI (subsidiaries that provide inputs to their parent firms) to be larger than commonly thought, even within developed countries. Most subsidiaries are not readily explained by the comparative advantage considerations whereby multinationals locate activities abroad to take advantage of factor cost differences. Instead, multinationals tend to own the stages of production proximate to their final production, giving rise to a class of high-skill, intra-industry vertical FDI.
Keywords
Business Subsidiaries; Competency and Skills; Foreign Direct Investment; Geographic Location; Multinational Firms and Management; Industry Structures; Production
Citation
Alfaro, Laura, and Andrew Charlton. "Intra-Industry Foreign Direct Investment." American Economic Review 99, no. 5 (December 2009): 2096–2119. (Also Harvard Business School Working Paper No. 08-018 and NBER Working Paper No. 13447.)
About The Author
