An empirical analysis of the determinants of global integration

Abstract

The primary concern of this paper is the structural characteristics of an industry that generate returns to transnational integration: manufacturing scale economies and technological intensity. Integration is operationalized as intrafirm flows of resources. Intrafirm trade as a proportion of all international sales is used as an index of integration across 56 manufacturing industries containing U.S.-based firms. Ordinary least-squares analysis of the determinants of integration—technological intensity, manufacturing scale, advertising intensity, and internationalization (as a control) reveals that technological intensity, advertising intensity, and the control are significant and scale is not. I argue that technology is the primary determinant of cross-border integration and the importance of manufacturing scale has been overemphasized, and conclude by discussing the implications of the increasing cost and complexity of technology for the state-based political system.