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Complex vertical FDI and firm heterogeneity: Evidence from East Asia

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  • Hayakawa, Kazunobu
  • Matsuura, Toshiyuki

Abstract

This study statistically tests the validity of the mechanics of complex vertical foreign direct investment (C-VFDI) in Japanese machinery FDI to East Asia by estimating a multiple-spatial lag model. From a theoretical perspective regarding C-VFDI, the production activity of affiliates in a given country is positively related to the production activity in neighboring countries that have large differences in factor prices with the given country. Furthermore, high-productivity firms are likely to choose a C-VFDI strategy. Our empirical results show no robust geographical relationship among affiliates' activities. However, the significantly positive relationship in wage differentials among those activities is found only for high-productivity firms.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of the Japanese and International Economies.

Volume (Year): 25 (2011)
Issue (Month): 3 (September)
Pages: 273-289

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Handle: RePEc:eee:jjieco:v:25:y:2011:i:3:p:273-289

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Web page: http://www.elsevier.com/locate/inca/622903

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Keywords: Third-country effects Complex VFDI Spatial lag model;

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Citations

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Cited by:
  1. Park, Innwon & Park, Soonchan, 2010. "Modes of foreign direct investment and patterns of trade: Why do multinational enterprises come To China?," MPRA Paper 26679, University Library of Munich, Germany.
  2. HAYAKAWA Kazunobu & MATSUURA Toshiyuki, 2013. "Heterogeneous Impact of Trade Liberalization on Vertical FDI: Evidence from Japanese firm-level data," Discussion papers, Research Institute of Economy, Trade and Industry (RIETI) 13020, Research Institute of Economy, Trade and Industry (RIETI).
  3. Fukunari Kimura & Ayako Obashi, 2011. "Production Networks in East Asia : What We Know So Far," Microeconomics Working Papers 23216, East Asian Bureau of Economic Research.
  4. Hiratsuka, Daisuke, 2011. "Production networks in the Asia-Pacific region : facts and policy implications," IDE Discussion Papers, Institute of Developing Economies, Japan External Trade Organization(JETRO) 315, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  5. ITO Koji, 2011. "FDI in Emerging Economies: An analysis in a firm heterogeneity model," Discussion papers, Research Institute of Economy, Trade and Industry (RIETI) 11055, Research Institute of Economy, Trade and Industry (RIETI).

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