Incomplete contracts And Vertically Integrated Multinational Enterprises

This paper conducts an empirical analysis of intra-firm trade for vertically integrated multinational enterprises (VMNEs). Within the context of incomplete contracts, the study attempts to explain cross-industry variations in the relative importance of intra firm trade. Using data for U.S. based multinationals from 1989 to 1996, it is found that the shares of U.S. intra-firm exports and imports are positively related to the non contractible a activities of U.S. intra-firm while they are negatively related to the non contractible activities of foreign affiliates. [F23, f10, L22]