Intra‐firm trade in the context of European integration: evidence from the French multinational agribusiness

Abstract

AbstractThis article identifies the factors that lead multinational firms to internalize their international exchanges and aims to determine the impact of the implementation of the Single European Market on firms' strategies. We analyze the interaction between the microeconomic characteristics of firms and those of their environment because this interaction determines a multinational firm's decision to internalize trade. The empirical work is based on the ‘industrial globalization’ survey conducted by the French statistics institutes in 1993 and 1999. With regard to the French agri‐food trade, there has been an increase in intra‐firm (IFT) trade within the EU‐15 borders and the European multinational networks. The main determinants of intra‐firm trade are the firms' need to generate economies of scale and to protect and exploit their ‘firm‐specific advantages’ related to the technology and nature of the product. The model sheds light on the role and the development of intra‐regional networks of subsidiaries. [JEL classifications: F10, F14, F23]. © 2009 Wiley Periodicals, Inc.