The determinants of intra-firm trade by overseas affiliates of Korean firms

Outward foreign direct investment by Korean firms has conspicuously increased since the beginning of this century, leading to the expansion of the network of international production and sales of Korean firms. The intra-firm trade between Korean parent firms and their affiliates abroad has substantially increased as well. Utilizing the survey data compiled by Korea Export and Import Bank, this paper examines the determinants of the extent of intra-firm trade by overseas affiliates of Korean firms, and obtains the following results. The higher the payment of royalties of affiliates, the lower is the extent of intra-firm trade. The longer the presence of the affiliates in host countries, reflecting the localization of the affiliates, the lower is the extent of intra-firm exports. The extent of intra-firm imports by manufacturing industries is negatively correlated with royalty payments and the exchange rate of Korean Won, and is positively correlated with the market size of the host country. KCI Citation Count: 1