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A Unified Approach to Intra-Industry Trade and Foreign Direct Investment

In: Frontiers of Research in Intra-Industry Trade

Author

Listed:
  • James R. Markusen
  • Keith E. Maskus

Abstract

The theory of international trade has long been relatively disjoint from the theory of foreign direct investment, the latter being viewed traditionally as part of the macroeconomic theory of capital flows. The foreign investment ‘regime’ (that is, restricted, liberal) could, of course, affect trade in this view, but only through changing the host country’s capital stock. This conceptual approach to direct investment began to break down in the 1980s as researchers noted that direct investment seemed to relate more to firm-specific assets than to measures of aggregate capital. Firms in the developed countries penetrated each other’s markets with intra-industry direct investment, and the directions of investment did not seem to bear any particular relationship to interest rates or other measures of returns to capital. Other studies refined the evidence by showing that direct investment was related closely to know-ledge-based and other intangible assets, and not to physical capital intensity (Eaton and Tamura, 1994; Brainard, 1997; Ekholm, 1998; Carr, et al., 2001; Markusen and Maskus, 2001). For recent surveys of empirical findings, see Markusen (1995, 1998) and Caves (1996).

Suggested Citation

  • James R. Markusen & Keith E. Maskus, 2002. "A Unified Approach to Intra-Industry Trade and Foreign Direct Investment," Palgrave Macmillan Books, in: P. J. Lloyd & Hyun-Hoon Lee (ed.), Frontiers of Research in Intra-Industry Trade, chapter 11, pages 199-219, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-28598-9_11
    DOI: 10.1057/9780230285989_11
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    Citations

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    Cited by:

    1. Ambroziak Łukasz, 2016. "FDI and Intra-industry Trade in the Automotive Industry in the New EU Member States," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 52(1), pages 23-42, December.
    2. Zhaoyong Zhang & LI Chuan, 2006. "Country-specific factors and the pattern of intra-industry trade in China's manufacturing," Journal of International Development, John Wiley & Sons, Ltd., vol. 18(8), pages 1137-1149.
    3. Filippo Reganati & Rosanna Pittiglio, 2007. "Two-way international trade and production in Italy: a country/industry specific analysis," STUDI ECONOMICI, FrancoAngeli Editore, vol. 2007(91), pages 75-89.
    4. Egger, Hartmut & Egger, Peter & Greenaway, David, 2008. "The trade structure effects of endogenous regional trade agreements," Journal of International Economics, Elsevier, vol. 74(2), pages 278-298, March.
    5. Jen-Yao Lee & Ya-Chuan Hsiao & Ngochien Bui & Tien-Thinh Nguyen, 2021. "Inward Foreign Direct Investment and Trade Openness in Vietnam: A Nonlinear Autoregressive Distributed Lag Approach," Economies, MDPI, vol. 9(3), pages 1-18, August.
    6. Yushi Yoshida & Nuno Carlos Leitão & Horácio Faustino, 2009. "Vertical Intra-Industry Trade and Foreign Direct Investment between Japan and European Countries," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 37(4), pages 351-365, December.
    7. Nielsen, Jørgen Ulff-Møller & Pawlik, Konrad, 2005. "The export intensity of foreign affiliates in transition economies - the importance of the organization of production," Working Papers 2005-7, University of Aarhus, Aarhus School of Business, Department of Management.
    8. Egger, Hartmut & Egger, Peter & Greenaway, David, 2007. "Intra-industry trade with multinational firms," European Economic Review, Elsevier, vol. 51(8), pages 1959-1984, November.
    9. Bishwanath Goldar & Rashmi Banga, 2007. "Impact of Trade Liberalization on Foreign Direct Investment in Indian Industries," Working Papers 3607, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..

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