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Vertical Keiretsu and International Market Entry: The Case of the Japanese Automobile Ancillary Industry

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  • Kunal Banerji

    (West Virginia University)

  • Rakesh B Sambharya

    (Rutgers University – Camden)

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    Abstract

    This study investigated whether small Japanese automobile ancillary firms followed the major Japanese automakers in setting up production facilities in the United States. Based on Dunning's eclectic theory of foreign direct investment and resource dependence theory, hypotheses were generated to explain the determinants of foreign investment of Japanese suppliers. It was hypothesized that mutual dependencies between the major Japanese automobile firms and their suppliers, firm-specific ownership advantages, profitability, and keiretsu affiliation influenced the foreign direct investment of the first-tier automobile ancillary firms into the United States. Data on the entire population of 446 Japanese automobile ancillary manufacturers were obtained from archival sources. Logistical regression analyses indicated that keiretsu affiliation, previous international experience, small size, lower dependence of supplier firms on the automobile assembly firm, and higher dependence of core firms on affiliate firms all contributed to this foreign direct investment.© 1996 JIBS. Journal of International Business Studies (1996) 27, 89–113

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    Bibliographic Info

    Article provided by Palgrave Macmillan in its journal Journal of International Business Studies.

    Volume (Year): 27 (1996)
    Issue (Month): 1 (March)
    Pages: 89-113

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    Handle: RePEc:pal:jintbs:v:27:y:1996:i:1:p:89-113

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    Cited by:
    1. McGuire, Jean & Dow, Sandra, 2002. "The Japanese keiretsu system: an empirical analysis," Journal of Business Research, Elsevier, vol. 55(1), pages 33-40, January.
    2. Leung, W. -F., 1998. "A model of coexistence of international joint ventures and foreign wholly-owned subsidiaries," Japan and the World Economy, Elsevier, vol. 10(2), pages 233-252, April.
    3. Peng, Mike W. & Lee, Seung-Hyun & Tan, J. Justin, 2001. "The keiretsu in Asia: Implications for multilevel theories of competitive advantage," Journal of International Management, Elsevier, vol. 7(4), pages 253-276.
    4. Peterson, Robert M. & Clay Dibrell, C. & Pett, Timothy L., 2002. "Long- vs. short-term performance perspectives of Western European, Japanese, and U.S. countries: where do they lie?," Journal of World Business, Elsevier, vol. 37(4), pages 245-255, January.
    5. Manev, Ivan M., 2003. "The managerial network in a multinational enterprise and the resource profiles of subsidiaries," Journal of International Management, Elsevier, vol. 9(2), pages 133-151.
    6. Alcantara, Lailani Laynesa & Mitsuhashi, Hitoshi, 2012. "Make-or-Break Decisions in Choosing Foreign Direct Investment Locations," Journal of International Management, Elsevier, vol. 18(4), pages 335-351.
    7. Dow, Sandra & McGuire, Jean, 2009. "Propping and tunneling: Empirical evidence from Japanese keiretsu," Journal of Banking & Finance, Elsevier, vol. 33(10), pages 1817-1828, October.
    8. Shuhei Nishitateno, 2012. "Global Production Sharing and FDI-Trade Nexus: New Evidence from the Japanese Automobile Industry," Asia Pacific Economic Papers 397, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
    9. Milner, Chris & Reed, Geoff & Talerngsri, Pawin, 2006. "Vertical linkages and agglomeration effects in Japanese FDI in Thailand," Journal of the Japanese and International Economies, Elsevier, vol. 20(2), pages 193-208, June.
    10. Nishitateno, Shuhei, 2013. "Global production sharing and the FDI–trade nexus: New evidence from the Japanese automobile industry," Journal of the Japanese and International Economies, Elsevier, vol. 27(C), pages 64-80.
    11. Pak, Yong Suhk & Park, Young-Ryeol, 2005. "Characteristics of Japanese FDI in the East and the West: Understanding the strategic motives of Japanese investment," Journal of World Business, Elsevier, vol. 40(3), pages 254-266, August.
    12. Xiaohua Yang & Yi Jiang & Rongping Kang & Yinbin Ke, 2009. "A comparative analysis of the internationalization of Chinese and Japanese firms," Asia Pacific Journal of Management, Springer, vol. 26(1), pages 141-162, March.
    13. Shuhei Nishitateno, 2012. "Global Production Sharing and the FDI–Trade Nexus: New Evidence from the Japanese Automobile Industry," Departmental Working Papers 2012-13, The Australian National University, Arndt-Corden Department of Economics.
    14. Xie, Yu Henry & Zhao, Hongxin John & Xie, Qian Jane & Arnold, Mark, 2011. "On the determinants of post-entry strategic positioning of foreign firms in a host market: A "strategy tripod" perspective," International Business Review, Elsevier, vol. 20(4), pages 477-490, August.
    15. Jean McGuire & Sandra Dow, 2009. "Japanese keiretsu: Past, present, future," Asia Pacific Journal of Management, Springer, vol. 26(2), pages 333-351, June.
    16. Banerji, Kunal & Sambharya, Rakesh B., 1998. "Effect of network organization on alliance formation: A study of the Japanese automobile ancillary industry," Journal of International Management, Elsevier, vol. 4(1), pages 41-57, July.

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