ABSTRACT
Within the framework of orthodox theory there is no scope for a formal analysis of the interaction between regional economic integration and TNCs, since firms, ownership and internalization considerations are entirely disregarded. Moreover, the orthodox paradigm could not explain intra-industry trade which, though not identical with the intra-firm trade of TNCs, is closely bound up with it. The development in the 1980s of newer theories of trade and integration and of industrial organization have opened the way to a systematic consideration of the interaction of regional and corporate integration, but a fully articulated model has yet to emerge. The basic question is whether the analysis linking domestic costs and prices with the direction, composition and extent of intra-group trade, and the distribution of its costs and benefits, continues to be valid when the operations of TNCs are explicitly taken into account.
