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Business groups, foreign direct investment, and capital goods trade: The import behavior of Japanese affiliates


  • Belderbos, René
  • Wakasugi, Ryuhei
  • Zou, Jianglei


We examine the impact of buyer–supplier relationships within business groups on capital goods trade by taking into account potential simultaneous effects of business group ties on foreign direct investment. We posit that (1) foreign affiliates of business group firms have a greater propensity to import capital goods from the home country, increasing home country exports; (2) if the establishment of overseas affiliates by business group firms attracts foreign direct investment by their capital goods suppliers, business group ties are localized and the ‘trade creating’ impact of business group ties may disappear or even be reversed. Empirical analysis of capital goods imports by 1790 manufacturing affiliates operated abroad by Japanese multinational firms, combined with information on linkages with machinery suppliers within horizontal and vertical business groups, provides broad support for these predictions. Our findings suggest that it may be incorrect to infer from the absence of a simple relationship between business group ties and trade that such ties are unimportant; instead, intra-group ties may be replicated abroad through foreign direct investment.

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  • Belderbos, René & Wakasugi, Ryuhei & Zou, Jianglei, 2012. "Business groups, foreign direct investment, and capital goods trade: The import behavior of Japanese affiliates," Journal of the Japanese and International Economies, Elsevier, vol. 26(2), pages 187-200.
  • Handle: RePEc:eee:jjieco:v:26:y:2012:i:2:p:187-200 DOI: 10.1016/j.jjie.2012.02.001

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    References listed on IDEAS

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    Cited by:

    1. ITO Keiko & TANAKA Ayumu, 2014. "The Impact of Multinationals' Overseas Expansion on Employment at Suppliers at Home: New evidence from firm-level transaction relationship data for Japan," Discussion papers 14011, Research Institute of Economy, Trade and Industry (RIETI).
    2. repec:eee:riibaf:v:42:y:2017:i:c:p:630-644 is not listed on IDEAS

    More about this item


    Multinational firms; Imports; Capital goods; FDI; Business groups;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory


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