The Determinants of Intrafirm Trade

This paper analyzes the determinants of the sourcing mode of imported inputs at the firm level. We exploit a unique French dataset of 1,141,393 import transactions spanning across firm, countries and products in 1999, where we observe whether a transaction is intra-firm or at arms ’ length. We first study which firm-, country- and product-specific factors affect the ‘make or buy ’ choice at the firm level (extensive margin). We confirm a number of theoretical predictions of property-rights models, and provide a number of empirical facts that can be used to refine theory. We finally compare our results with previous findings on more aggregated data, highlighting the importance of separating the extensive and intensive margins of imports