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Global Production Sharing and FDI-Trade Nexus: New Evidence from the Japanese Automobile Industry

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  • Shuhei Nishitateno

Abstract

The growing importance of global production sharing makes the analysis of the nexus between outward foreign direct investment (FDI) and trade in intermediate goods ever more important. This study examines the substitution hypothesis that FDI by upstream firms replaces intermediate exports from home, using the case of the Japanese automobile industry. In analysing newly-constructed product-level data covering 37 products and 49 host countries over the period 1999 to 2008, this study finds a complementary relationship between these two variables. The findings cast doubt on the popular view that the growing overseas activity of multinational enterprises could replace intermediate exports from a home country thereby depriving the locals of job opportunities and deindustrialising the domestic economy under ongoing global production sharing.

Suggested Citation

  • Shuhei Nishitateno, 2012. "Global Production Sharing and FDI-Trade Nexus: New Evidence from the Japanese Automobile Industry," Asia Pacific Economic Papers 397, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:csg:ajrcau:397
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    File URL: https://crawford.anu.edu.au/pdf/pep/apep-397.pdf
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    References listed on IDEAS

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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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