Exports in the Strategy of Multinational Enterprises

Abstract

This chapter is an investigation of the relationship between the extent of a firm’s foreign production and its home country exporting performance. The methodology is based on cross-sectional analysis at the firm level. It enables us to establish a number of statistical relationships but does not allow us to establish conclusively the effects of foreign production on parent firm export performance. To assess the effects fully we would need to know the level of export performance at some other level of foreign production. Received hypotheses on these issues suggest that foreign production might substitute for exports of final products from the parent, but be complementary with increased exports of intermediate goods (parts and components) from the parent. In addition, the foreign production subsidiary may act as a sales subsidiary for goods produced by the parent.^{3, 15} In fact, a study of US firms in 1965 showed that 49 per cent of total intra-firm exports were ‘goods for resale without further manufacture’, another 7 per cent were ‘exports sold for parents’ account on a commission basis’, making the total share of finished goods for resale 56 per cent. Goods ‘for further processing and assembly’ represented another 36 per cent, capital equipment 5 per cent, with 3 per cent unallocated.^{2, 11}