The effect of intra-firm linkages on firm productivity

In this study, we investigate the relationship between intra-firm linkages and firm productivity using a unique dataset from Korean multinational foreign affiliates. In an empirical analysis, we find that while intra-firm imports are not statistically associated with productivity on an economy-wide scale, a positive relationship exists among affiliates in industries with high levels of research and development (R&D) intensity. Our findings show that productivity gains from intra-firm trade are larger for affiliates in high R&D intensity industries, thus providing evidence that intra-firm trade is an important channel for knowledge transfer related to R&D for foreign affiliates of multinational corporations.