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Why Has the Border Effect in the Japanese Machinery Sectors Declined? The role of business networks in East Asian machinery trade

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  • Kyoji Fukao

    (Hitotsubashi University)

  • Toshihiro Okubo

    (Keio University)

Abstract

This paper analyzes the impact of firm networks on Japan's national border effect. We estimate gravity equations using data on Japan's international and interregional trade in four machinery industries (electrical, general, precision and transportation machinery). The machinery sector is the most important manufacturing sector for exports and outward foreign direct investment (FDI) in Japan. By taking into account international as well as interregional firm networks, we find that ownership relations usually enhance exports from parent firms to establishment. Consequently we can explain 15% (7%, 1% and 0.5%) of the decline in Japan's border effect from 1980 to 1995 in precision (transportation, general electrical) machinery sector by the increase of international networks.

Suggested Citation

  • Kyoji Fukao & Toshihiro Okubo, 2011. "Why Has the Border Effect in the Japanese Machinery Sectors Declined? The role of business networks in East Asian machinery trade," Keio/Kyoto Joint Global COE Discussion Paper Series 2011-007, Keio/Kyoto Joint Global COE Program.
    • Handle: RePEc:kei:dpaper:2011-007
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    Cited by:

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    2. Okubo, Toshihiro & Kimura, Fukunari & Teshima, Nozomu, 2014. "Asian fragmentation in the Global Financial Crisis," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 114-127.
    3. Hayakawa, Kazunobu, 2017. "Domestic and international border effects: The cases of China and Japan," China Economic Review, Elsevier, vol. 43(C), pages 118-126.

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    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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