Intrafirm Trade and Vertical Fragmentation in U.S. Multinational Corporations

Using firm-level data, we document two new facts regarding intrafirm trade and the activities of the foreign affiliates of U.S. multinational corporations. First, intrafirm trade is concentrated among a small number of large affiliates within large multinational corporations; the median affiliate ships nothing to the rest of the corporation. Second, we find that the input-output coefficient linking the parent’s and affiliate’s industries of operation—a characteristic commonly associated with production fragmentation— is not related to a corresponding intrafirm flow of goods.