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A Decomposition of Factors Influencing Horizontal and Vertical FDI: A Separate Analysis

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  • Kazuhiko Yokota

    () (Faculty of Commerce, Waseda University, 1-6-1, Nishi-waseda, Shinjuku-ku, Tokyo, 169-8050, Japan.)

  • Akinori Tomohara

    () (Anderson Graduate School of Management, University of California Los Angeles, Los Angeles, CA 90095, USA.)

Abstract

While the literature has explored which factors determine the emergence of different multinational enterprise (MNE) structures (i.e., horizontal or vertical MNEs), little attention has been paid to differences within the same MNE type. This paper proposes an index to distinguish horizontal foreign direct investment (FDI) from vertical FDI and tries to identify different FDI motivations within the same MNE type. The analysis indicates that industry type, FDI destinations, and the interaction of the two play an important role in determining MNE structures. Our analysis uncovers interesting FDI patterns from data and obtains a more nuanced typology of the US multinational affiliate activities.

Suggested Citation

  • Kazuhiko Yokota & Akinori Tomohara, 2009. "A Decomposition of Factors Influencing Horizontal and Vertical FDI: A Separate Analysis," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 35(4), pages 462-478.
  • Handle: RePEc:pal:easeco:v:35:y:2009:i:4:p:462-478
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