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Complex Vertical FDI and Firm Heterogeneity: Evidence from East Asia

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  • Kazunobu Hayakawa

    (Inter-disciplinary Studies Center, Institute of Developing Economies)

  • Toshiyuki Matsuura

    (Institute of Economic and Industrial Studies, Keio University)

Abstract

In this study, we statistically test the validity of the mechanics of complex vertical foreign direct investment (VFDI) in Japanese machinery FDI to East Asia by estimating a multiple-spatial lag model. From the theoretical viewpoint, in complex VFDI, the production activity of affiliates in a given country is positively related to that in neighboring countries that have large differences in factor prices with the given country. Our empirical results show that such mechanics of complex VFDI work in Japanese FDI to East Asia, and that they work more strongly in those MNEs with higher productivity. These results have important implications on the policies of developing countries in attracting FDI.

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Bibliographic Info

Paper provided by Keio/Kyoto Joint Global COE Program in its series Keio/Kyoto Joint Global COE Discussion Paper Series with number 2010-008.

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Length: 34 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:kei:dpaper:2010-008

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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. Hiratsuka, Daisuke, 2011. "Production networks in the Asia-Pacific region : facts and policy implications," IDE Discussion Papers 315, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  3. HAYAKAWA Kazunobu & MATSUURA Toshiyuki, 2013. "Heterogeneous Impact of Trade Liberalization on Vertical FDI: Evidence from Japanese firm-level data," Discussion papers 13020, Research Institute of Economy, Trade and Industry (RIETI).
  4. 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.
  5. ITO Koji, 2011. "FDI in Emerging Economies: An analysis in a firm heterogeneity model," Discussion papers 11055, Research Institute of Economy, Trade and Industry (RIETI).

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