into each other. The purpose of this paper is to show how the theory of direct investment can now be integrated with the … theory of international trade in goods, and to show how the two combine to determine the pattern of trade and foreign … affiliate production. Empirical estimation gives good support to the predictions of the theory for intra-industry affiliate …

, general-equilibrium theory of international trade. Recent advances indicate how vertical and horizontal multinationals arise … theory. In the second part of the paper, we examine empirical results that relate foreign affiliate production to country …