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Overseas Production Expansion and Domestic Transaction Networks

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  • HAYAKAWA Kazunobu
  • MATSUURA Toshiyuki

Abstract

In this study, we empirically examine the effects of customers' foreign direct investment (FDI) on their domestic transaction ties and the performance of their suppliers. In particular, we examine the difference in such effects between the first- (direct) and second-tier (indirect) suppliers. To this end, we utilize a unique firm-level survey in Japan that contains information on inter-firm transaction networks matched with FDI data. Our findings can be summarized as follows. There is no evidence that customers' FDI is more likely to suspend their domestic transactions. Rather, direct suppliers' transaction ties with multinational enterprises (MNEs) are more persistent than those with other firms. Although such an effect becomes weak for transactions between direct and indirect suppliers, we did not find a negative effect. Furthermore, customers' FDI has a significantly positive impact on employment growth for both their direct and indirect suppliers.

Suggested Citation

  • HAYAKAWA Kazunobu & MATSUURA Toshiyuki, 2017. "Overseas Production Expansion and Domestic Transaction Networks," Discussion papers 17085, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:17085
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