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Export platform FDI and firm heterogeneity

Author

Listed:
  • Hayakawa, Kazunobu
  • Tanaka, Kiyoyasu

Abstract

This paper investigates theoretically and empirically firms' productivity ranking among traditional horizontal foreign direct investment (HFDI), pure platform FDI (PFDI), and complex platform FDI (CFDI). Using data on Japanese outward FDI, we define firms conducting HFDI or PFDI as those Japanese firms that maintain production affiliates only in the U.S. or Mexico, respectively. The firms for CFDI are defined as having production affiliates in both the U.S. and Mexico. The theoretical illustration shows that the CFDI firms should have the highest productivity when trade costs between the U.S. and Mexico are low. By carefully disentangling firms' self-selection effects from learning-by-investing effects, we find some evidence consistent with this hypothesis for a period of relatively low trade costs. Our results indicate the importance of trade costs in developing countries with neighboring markets in attracting foreign investment by highly productive multinational firms.

Suggested Citation

  • Hayakawa, Kazunobu & Tanaka, Kiyoyasu, 2011. "Export platform FDI and firm heterogeneity," IDE Discussion Papers 310, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  • Handle: RePEc:jet:dpaper:dpaper310
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    References listed on IDEAS

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    More about this item

    Keywords

    Mexico; Japan; United States; Foreign investments; Foreign affiliated firm; Exports; Costs; Export platform; FDI; Firm heterogeneity; Trade costs;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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