Intra-firm trade and foreign direct investment: an empirical analysis of French firms

Moreover, international trade is increasingly dominated by multinational firms. Actually, intra-firm trade (i.e. trade between a parent company and its affiliates) represents, in 1998 (UNTCAD 1999), 30 per cent of world trade and also 30 per cent of total French trade2 (Mathieu 1998). In that context, it seems necessary to divide global trade into two classes: intra-firm and inter-firm trade (or arm’s length transactions). The relationship between FDI and each of these categories of trade has to be tested in order to highlight the potential impact of establishment of affiliates abroad on trade. Our paper deals with this concern for French intra-firm trade, which has never been explored in these terms. Indeed, individual databases for French multinational firms are exploited here for the first time.