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Production Networks in East Asia : Strategic Behavior by Japanese and U.S. firms

  • Mitsuyo Ando

    (Hitotsubashi University, Lowe Institute of Political Economy, Claremont McKenna College, Keio University)

  • Sven W. Arndt
  • Fukunari Kimura

This paper investigates production networks in East Asia, focusing on strategic behavior by Japanese and U.S. firms, to discuss implications of the production sharing and fragmentation and of the role of MNEs in creating and coordinating the activities within production networks. For that purpose, our study first theoretically examines the effect of fragmentation and the issues from the viewpoint of firms and then empirically analyzes the activities of Japanese and U.S. firms not only in developing East Asia but also in Latin America. Our empirical findings indicate that the regional investment climate is more important in promoting production networks than differences in firm nationalities. In East Asia, both Japanese and U.S. firms display very similar patterns in exploiting the international division of labor extended and both present close links between geographical proximity and arms length fragmentation. On the other hand, such patterns for both firms are very different in Latin America, suggesting that the explanation lies in differences between the two regions. This finding has various important implications for policy makers.

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File URL: http://www.eaber.org/node/21886
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Paper provided by East Asian Bureau of Economic Research in its series Microeconomics Working Papers with number 21886.

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Date of creation: Aug 2006
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Handle: RePEc:eab:microe:21886
Contact details of provider: Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200
Web page: http://www.eaber.org

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  1. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
  2. Richard Baldwin, 2005. "Heterogeneous Firms and Trade: Testable and Untestable Properties of the Melitz Model," NBER Working Papers 11471, National Bureau of Economic Research, Inc.
  3. Arndt, Sven W., 1997. "Globalization and the open economy," The North American Journal of Economics and Finance, Elsevier, vol. 8(1), pages 71-79.
  4. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
  5. Kimura, Fukunari & Ando, Mitsuyo, 2003. "Fragmentation and agglomeration matter: Japanese multinationals in Latin America and East Asia," The North American Journal of Economics and Finance, Elsevier, vol. 14(3), pages 287-317, December.
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