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Complex Vertical FDI and Firm Heterogeneity: Evidence from East Asia

  • Hayakawa, Kazunobu
  • Matsuura, Toshiyuki

In this paper we statistically test the validity of the mechanics of complex VFDI in Japanese machinery FDI to East Asia; we do this by estimating a multiple-spatial lag model. From the theoretical point of view, in complex VFDI, the production activity of affiliates in a given country is positively related to that in neighboring countries which have large differences in factor prices with the given country. Our empirical results show that such mechanics of complex VFDI work in Japanese FDI to East Asia, and that they work more strongly in the MNEs with higher productivity. These results have an important implication for the policies of developing countries in attracting FDI.

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File URL: http://ir.ide.go.jp/dspace/bitstream/2344/856/1/211.pdf
File Function: First version, 2009
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Paper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 211.

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Date of creation: Aug 2009
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Publication status: Published in IDE Discussion Paper. No. 211. 2009. 08
Handle: RePEc:jet:dpaper:dpaper211
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