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

  • Spencer, Barbara J
  • Qiu, Larry D

This article 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 automaker 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 tailpipes, and it is possible that no parts are imported, despite lower foreign costs. Lack of information concerning investment rents combined with counterintuitive responses of imports to changes in output and costs could create unwarranted perceptions of a trade barrier.

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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 42 (2001)
Issue (Month): 4 (November)
Pages: 871-901

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Handle: RePEc:ier:iecrev:v:42:y:2001:i:4:p:871-901
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  1. Weinstein, David E & Yafeh, Yishay, 1995. "Japan's Corporate Groups: Collusion or Competitive? An Empirical Investigation of Keiretsu Behavior," Journal of Industrial Economics, Wiley Blackwell, vol. 43(4), pages 359-76, December.
  2. Krishna, Kala & Roy, Suddhasatwa & Thursby, Marie, 1998. "Implementing Market Access," Review of International Economics, Wiley Blackwell, vol. 6(4), pages 529-44, November.
    • 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.
  3. Qiu, Larry D. & Spencer, Barbara J., 2002. "Keiretsu and relationship-specific investment: implications for market-opening trade policy," Journal of International Economics, Elsevier, vol. 58(1), pages 49-79, October.
  4. 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.
  5. Spencer, Barbara J & Raubitschek, Ruth S, 1996. "High-Cost Domestic Joint Ventures and International Competition: Do Domestic Firms Gain?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 315-40, May.
  6. Kala Krishna & John Morgan, 1996. "Implementing Results-Oriented Trade Policies: The Case of the US-Japanese Auto Parts Dispute," NBER Working Papers 5680, National Bureau of Economic Research, Inc.
  7. Oliver Hart & Sanford Grossman, 1985. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Working papers 372, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Robert Z. Lawrence, 1993. "Japan's Different Trade Regime: An Analysis with Particular Reference to Seiretsu," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 3-19, Summer.
  9. Perry, Martin K., 1989. "Vertical integration: Determinants and effects," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 4, pages 183-255 Elsevier.
  10. Banri Asanuma, 1985. "The Organization of Parts Purchases in the Japanese Automotive Industry," Japanese Economy, M.E. Sharpe, Inc., vol. 13(4), pages 32-53, July.
  11. 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.
  12. 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.
  13. Marvel, Howard P, 1982. "Exclusive Dealing," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 1-25, April.
  14. 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.
  15. Jones, R.W. & Spencer, B.J., 1989. "Trade And Protection In Vertically Related Markets," RCER Working Papers 195, University of Rochester - Center for Economic Research (RCER).
  16. 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(1), pages 311-341.
  17. K.C. Fung, 1991. "Characteristics of Japanese Industrial Groups and Their Potential Impact on U. S . - Japanese Trade," NBER Chapters, in: Empirical Studies of Commercial Policy, pages 137-168 National Bureau of Economic Research, Inc.
  18. Fung, K. C., 2002. "International Trade and Bank Groups: Welfare Enhancing or Welfare Reducing?," Journal of the Japanese and International Economies, Elsevier, vol. 16(2), pages 212-226, June.
  19. 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.
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