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Networked FDI: Sales and Sourcing Patterns of Japanese Foreign Affiliates

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  • Richard Baldwin
  • Toshihiro Okubo

Abstract

This paper applies a novel empirical approach to characterising the horizontal-ness and vertical-ness of affiliates based on Yeaple’s complex FDI concept. In its simplest form, horizontal-ness is measured as affiliates' local sales share while their vertical-ness is measures as their share of non-local sourcing of intermediates. Japanese affiliates in most sectors and nations are partly vertical and partly horizontal but those in North American are far more ‘horizontal’ than those in the EU and Asia. Affiliates became more vertical between 1996 and 2005. A four-way sales and sourcing split (host, home, regional and RoW) suggests that affiliates act as nodes in regional production networks – especially in Asia. We posit several hypotheses that could be tested with our empirical approach.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18083.

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Date of creation: May 2012
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Publication status: published as Richard Baldwin & Toshihiro Okubo, 2014. "Networked FDI: Sales and Sourcing Patterns of Japanese Foreign Affiliates," The World Economy, Wiley Blackwell, vol. 37(8), pages 1051-1080, 08.
Handle: RePEc:nbr:nberwo:18083

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Cited by:
  1. JINJI Naoto & Xingyuan ZHANG, 2013. "Innovation in the Host Country and the Structure of Foreign Direct Investment: Evidence from Japanese multinationals," Discussion papers, Research Institute of Economy, Trade and Industry (RIETI) 13060, Research Institute of Economy, Trade and Industry (RIETI).
  2. ITO Tadashi, 2013. "FTA and Export Platform Foreign Direct Investment: Evidence from Japanese firm level data," Discussion papers, Research Institute of Economy, Trade and Industry (RIETI) 13100, Research Institute of Economy, Trade and Industry (RIETI).
  3. Nobuhiro Hosoe, 2013. "Japanese Manufacturing Facing the Power Crisis after Fukushima: A Dynamic Computable General Equilibrium Analysis with Foreign Direct Investment," GRIPS Discussion Papers 13-01, National Graduate Institute for Policy Studies.
  4. Kamran Bilir & Davin Chor & Kalina Manova, 2014. "Host-Country Financial Development and Multinational Activity," NBER Working Papers 20046, National Bureau of Economic Research, Inc.
  5. THORBECKE, Willem & Nimesh SALIKE, 2013. "Foreign Direct Investment in East Asia," Policy Discussion Papers, Research Institute of Economy, Trade and Industry (RIETI) 13003, Research Institute of Economy, Trade and Industry (RIETI).

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