Exporting, Global Sourcing, and Multinational Activity: Theory and Evidence from the United States

This article examines how multinational firms integrate exporting, importing, and foreign production decisions within global value chains. Using newly merged data on U.S. firms’ trade and multinational activity by country, the authors show that multinational enterprises are more likely to trade not only with countries where they operate affiliates, but also with nearby countries within those regions. The paper develops a theoretical framework in which firms share country-specific fixed costs across production plants, generating scale economies and interdependencies between trade and multinational activity. The findings demonstrate that trade policies can produce important third-market effects through firms’ global production networks, contributing to broader understanding of multinational behavior and international trade organization.