International organization of production and variation in exports from affiliates

Abstract. There is no simple relationship between internationalization of firms ' operations and expanding trade. The variation in exports from Swedish affiliates is here shown to be influenced by properties related to their degree of vertical and horizontal integration. Affiliates ' propensity to export is positively affected by production in few countries, inter-mediate imports from the parent, plant size, income level of the host country and a location in the European Community, and is negatively affected by R&D intensity and the size of the host country market. World trade is increasingly influenced by multinational enterprises (MNEs) which own and control assets in more than one country through direct investment.1 With the product life cycle theory, Vernon [1966, 1979] high-lighted that MNEs contribute to the international specialization of production. As in traditional work on trade and investment, the underlying presumption is that firms are exploiting cross-country differences in factor costs or technologies. Newer theories have added considerations of produc