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The Formation of International Production and Distribution Networks in East Asia

In: International Trade in East Asia, NBER-East Asia Seminar on Economics, Volume 14

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  • Mitsuyo Ando
  • Fukunari Kimura

Abstract

The international production and distribution networks consist of vertical production chains and distribution networks extended across a number of countries. This paper claims that the international production and distribution networks in East Asia present distinctive characters in their significance in the regional economy, their geographical extensiveness involving a large number of countries in the region, and their sophistication of both intra-firm and arm's-length relationships across different firm nationalities. The paper starts from reviewing crucial changes in policy framework observed in the developing East Asian countries a decade ago and sketching the theoretical thoughts explaining the mechanics of international production and distribution networks. Then, the empirical part of the paper examines the micro data of Japanese corporate firms to make a closer look at the nature of networks through the pattern of FDI after analyzing overall trade patterns of the major East Asian countries to confirm the importance of international trade of machinery parts and components. In addition, the paper quantifies the magnitude of economic activities of Japanese firms through different channels of transactions, using the firm nationality approach. The last part of the paper discusses policy implication of the networks.

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This chapter was published in:

  • Takatoshi Ito & Andrew K. Rose, 2005. "International Trade in East Asia, NBER-East Asia Seminar on Economics, Volume 14," NBER Books, National Bureau of Economic Research, Inc, number ito_05-1, October.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 0194.

    Handle: RePEc:nbr:nberch:0194

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    1. Robert E. Baldwin & Robert E. Lipsey & J. David Richards, 1998. "Geography and Ownership as Bases for Economic Accounting," NBER Books, National Bureau of Economic Research, Inc, number bald98-1, October.
    2. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
    3. Deardorff, Alan V., 2001. "Fragmentation in simple trade models," The North American Journal of Economics and Finance, Elsevier, vol. 12(2), pages 121-137, July.
    4. Fukao, Kyoji & Ishido, Hikari & Ito, Keiko, 2003. "Vertical intra-industry trade and foreign direct investment in East Asia," Journal of the Japanese and International Economies, Elsevier, vol. 17(4), pages 468-506, December.
    5. Fukunari Kimura, 2000. "Location and Internalization Decisions: Sector Switching in Japanese Outward Foreign Direct Investment," NBER Chapters, in: The Role of Foreign Direct Investment in East Asian Economic Development, NBER-EASE Volume 9, pages 79-111 National Bureau of Economic Research, Inc.
    6. repec:idb:brikps:9179 is not listed on IDEAS
    7. Deardorff, A.V., 1998. "Fragmentation Across Cones," Papers 98-14, Michigan - Center for Research on Economic & Social Theory.
    8. Fukunari Kimura & Robert E. Baldwin, 1996. "Application of Nationality-Adjusted Net Sales and Value Added Framework: The Case of Japan," NBER Working Papers 5670, National Bureau of Economic Research, Inc.
    9. Kimura, Fukunari & Ando, Mitsuyo, 2003. "Fragmentation and agglomeration matter: Japanese multinationals in Latin America and East Asia," The North American Journal of Economics and Finance, Elsevier, vol. 14(3), pages 287-317, December.
    10. Arndt, Sven W. & Kierzkowski, Henryk (ed.), 2001. "Fragmentation: New Production Patterns in the World Economy," OUP Catalogue, Oxford University Press, number 9780199243310.
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