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Keiretsu and Relationship-Specific Investment: A Barrier to Trade?

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Author Info
Barbara J. Spencer
Larry D. Qiu

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Abstract

This paper develops a model of informal procurement within Japanese keiretsu so as to consider effects on intermediate-good imports, such as auto parts. Parts-suppliers make relationship-specific investments that benefit the auto-maker and prices are determined by bargaining after investment has been sunk. Although this investment raises efficiency, it limits the range of imports to less important parts such as tail pipes and it is possible that no parts are imported, despite lower foreign production costs. Lack of information concerning investment rents combined with counterintuitive effects on imports and Japanese production costs could create unwarranted perceptions of a trade barrier.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7572.

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Date of creation: Feb 2000
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Publication status: published as Spencer, Barbara J. and Larry D. Qiu. "Keiretsu And Relationship-Specific Investment: A Barrier To Trade?," International Economic Review, 2001, v42(4,Nov), 871-901.
Handle: RePEc:nbr:nberwo:7572

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F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Spencer, Barbara J. & Jones, Ronald W., 1992. "Trade and protection in vertically related markets," Journal of International Economics, Elsevier, vol. 32(1-2), pages 31-55, February. [Downloadable!] (restricted)
    Other versions:
  2. Robert C. Feenstra & Deng-Shing Huang & Gary G. Hamilton, 1997. "Business Groups and Trade in East Asia: Part 1, Networked Equilibria," NBER Working Papers 5886, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Taylor, Curtis R & Wiggins, Steven N, 1997. "Competition or Compensation: Supplier Incentives under the American and Japanese Subcontracting Systems," American Economic Review, American Economic Association, vol. 87(4), pages 598-618, September. [Downloadable!] (restricted)
  4. Krishna, Kala & Morgan, John, 1998. "Implementing results-oriented trade policies: The case of the US-Japanese auto parts dispute," European Economic Review, Elsevier, vol. 42(8), pages 1443-1467, September. [Downloadable!] (restricted)
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  5. McLaren, John, 1999. "Supplier relations and the market context: A theory of handshakes," Journal of International Economics, Elsevier, vol. 48(1), pages 121-138, June. [Downloadable!] (restricted)
  6. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August. [Downloadable!] (restricted)
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  7. Robert Z. Lawrence, 1991. "Efficient or Exclusionist: The Import Behavior of Japanese Corporate Groups," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1991-1), pages 311-341. [Downloadable!]
  8. Marvel, Howard P, 1982. "Exclusive Dealing," Journal of Law & Economics, University of Chicago Press, vol. 25(1), pages 1-25, April.
  9. Asanuma, Banri, 1989. "Manufacturer-supplier relationships in Japan and the concept of relation-specific skill," Journal of the Japanese and International Economies, Elsevier, vol. 3(1), pages 1-30, March. [Downloadable!] (restricted)
  10. Greaney, Theresa M., 1999. "Manipulating market shares: The indirect effects of voluntary import expansions (VIEs)," Japan and the World Economy, Elsevier, vol. 11(1), pages 95-113, January. [Downloadable!] (restricted)
  11. Krishna, Kala & Roy, Suddhasatwa & Thursby, Marie, 1998. "Implementing Market Access," Review of International Economics, Blackwell Publishing, vol. 6(4), pages 529-44, November.
    Other versions:
    • Krishna, K & Thursby, M & Roy, S, 1996. "Implementing Market Access," Papers 96-011, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).
    • Krishna, K & Roy, S & Thursby, M, 1996. "Implementaing Market Access," Papers 96-003, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).
    • Kala Krishna & Suddhasatwa Roy & Marie Thursby, 1996. "Implementing Market Access," NBER Working Papers 5593, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kaie Kerem & Vello Vensel, 2005. "Theory and Empirical Evidence of Business Support Networks," Working Papers 129, School of Economics and Business Administration, Tallinn University of Technology. [Downloadable!]
  2. Keith Head & John Ries & Barbara J. Spencer, 2002. "Vertical Networks and US Auto Parts Exports: Is Japan Different?," NBER Working Papers 9162, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Horst Raff & Nicolas Schmitt, 2004. "Exclusive Dealing and Common Agency in International Markets," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  4. Larry D. Qiu & Barbara J. Spencer, 2001. "Keiretsu and Relationship-Specific Investment: Implications for Market-Opening Trade Policy," NBER Working Papers 8279, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Andrew F. Daughety, 2006. "Cournot Competition," Working Papers 0620, Department of Economics, Vanderbilt University. [Downloadable!]
  6. Rachel E. Kranton & Deborah F. Minehart, 2002. "Vertical Foreclosure and Specific Investments," Economics Working Papers 0013, Institute for Advanced Study, School of Social Science. [Downloadable!]
  7. Vello Vensel, 2004. "Operation of Business Supporting Networks: Evidence from an EU Candidate Country," Working Papers 117, School of Economics and Business Administration, Tallinn University of Technology. [Downloadable!]
  8. Theresa Greaney, 2002. "Reverse Importing and Asymmetric Trade and FDI: A Networks Explanation," Working Papers 200215, University of Hawaii at Manoa, Department of Economics. [Downloadable!]
    Other versions:
  9. Robert C. Feenstra & Barbara J. Spencer, 2005. "Contractual Versus Generic Outsourcing: The Role of Proximity," NBER Working Papers 11885, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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