Firm in Home serve foreign markets / source from abroad? Stay domestic Export Export or local production? Import or local production? Import Multinational activity: horizontal Multinational activity: vertical no yes, serve foreign market yes, source from abroad export local production import local production Two types of trade: intra-firm and inter-firm Consisting of trade in final goods, services, and intermediate goods Two types of multinational activity: horizontal and vertical Multinational = firm owning and controlling value adding activities in two or more countries triggers intra-firm trade Figure 2.1 Home firm decision tree

Country A Country B Market AMarket B Multinational (producer) Multinational (producer, marketer) Foreign subsidiary (producer) Foreign subsidiary (assembler) FDI Finished products Components Horizontal multinational (market seeking) Vertical multinational (efficiency seeking) Fig. 2.2 Horizontal and vertical multinational activity

Figure 2.3 US export shares in 2010 Source: US census Bureau, own calculations

Figure 2.4 A country’s balance of payments Source: van Marrewijk (2012, p. 411)

Figure 2.5 Current account balance; % of GDP, Source: based on data from World Development Indicators online ( ) and The Economist, June 9, 2012, “Trade, exchange rates, budget balances, and interest rates” (2012 estimate).

Figure 2.6 FDI flows, Source: based on data from UNCTAD, World Investment Report 2012; developed = developed economies; developing = developing economies; transition = transition economies.

Figure 2.7 Value added export (VAX) as a share of GDP; 1995 and 2008 (%) Source: based on World input output Database (WIOD), see wiod.org.wiod.org

Figure 2.8 Value added distributon of an Apple iPad, 2011 Source: The figure is based on data provided by Linden et al (2009, 2011). See also The Economist January 21, 2012.

Figure 2.9 Global net capital flows; average for 15 countries, Source: see Table 2.11; average includes countries listed in Table 2.11 plus Denmark, Finland, the Netherlands, Norway, Spain, and Sweden.

Figure 2.10 Capital outflows; selected countries (% of national savings Source: O’Rourke and Williamson (1999).

Figure 2.11 Evolution of British and American share in foreign assets Source: see Table 2.14

Figure 2.12 Net private financial flows to developing economies; $ bn, Source: IMF, World Economic Outlook database; D Asia = Developing Asia; L Am = Latin America & Caribbean; C&E Eur = Central & Eastern Europe; CIS = Commonwealth of Independent States; SSA = Sub-Saharan Africa.