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Networked FDI: Sales and Sourcing Patterns of Japanese Foreign Affiliates

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  • Richard Baldwin
  • Toshihiro Okubo

Abstract

This paper applies a novel empirical approach to characterising the horizontal-ness and vertical-ness of affiliates based on Yeaple's complex FDI concept. In its simplest form, horizontal-ness is measured as affiliates' local sales share while their vertical-ness is measures as their share of non-local sourcing of intermediates. Japanese affiliates in most sectors and nations are partly vertical and partly horizontal but those in North American are far more 'horizontal' than those in the EU and Asia. Affiliates became more vertical between 1996 and 2005. A four-way sales and sourcing split (host, home, regional and RoW) suggests that affiliates act as nodes in regional production networks - especially in Asia. We posit several hypotheses that could be tested with our empirical approach.

Suggested Citation

  • Richard Baldwin & Toshihiro Okubo, 2012. "Networked FDI: Sales and Sourcing Patterns of Japanese Foreign Affiliates," NBER Working Papers 18083, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:18083
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    Cited by:

    1. Ayumu Tanaka, 2016. "Foreign Direct Investment and Temporary Workers in Japan," Discussion papers e-16-011, Graduate School of Economics , Kyoto University.
    2. Mitsuo Inada & Yung-Hsing Guo, 2016. "Heterogeneous Impacts of a Change in Chinese FDI Regulations on Domestic Market Outcomes: Empirical Evidence from Taiwanese Plant Data," KIER Working Papers 934, Kyoto University, Institute of Economic Research.
    3. María C. Latorre & Nobuhiro Hosoe, 2014. "How much can foreign multinationals affect the Chinese economy? A dynamic general equilibrium analysis of Japanese FDI," GRIPS Discussion Papers 14-16, National Graduate Institute for Policy Studies.
    4. Rodolfo Metulini & Massimo Riccaboni & Paolo Sgrignoli & Zhen Zhu, 2017. "The Indirect Effects of FDI on Trade: A Network Perspective," Working Papers 04/2017, IMT Institute for Advanced Studies Lucca, revised Mar 2017.
    5. Toshihiro Okubo & Yuta Watabe & Kaori Furuyama, 2016. "Export of Recyclable Materials: Evidence from Japan," Asian Economic Papers, MIT Press, vol. 15(1), pages 134-148, Winter/Sp.
    6. 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.
    7. Kamran Bilir & Davin Chor & Kalina Manova, 2014. "Host-Country Financial Development and Multinational Activity," NBER Working Papers 20046, National Bureau of Economic Research, Inc.
    8. repec:eee:reveco:v:49:y:2017:i:c:p:499-514 is not listed on IDEAS
    9. Stefano Federico, 2016. "How does multinational production affect the measurement of competitiveness?," Questioni di Economia e Finanza (Occasional Papers) 301, Bank of Italy, Economic Research and International Relations Area.
    10. Nobuhiro Hosoe, 2013. "Japanese Manufacturing Facing the Power Crisis after Fukushima: A Dynamic Computable General Equilibrium Analysis with Foreign Direct Investment," GRIPS Discussion Papers 13-01, National Graduate Institute for Policy Studies.
    11. Gordon H. Hanson, 2017. "What Do We Really Know about Offshoring? Industries and Countries in Global Production Sharing," Development Working Papers 416, Centro Studi Luca d'Agliano, University of Milano, revised 21 Feb 2017.
    12. Gries, T. & Grundmann, R. & Palnau, I. & Redlin, M., 2015. "Does technological change drive inclusive industrialization? : A review of major concepts and findings," MERIT Working Papers 044, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    13. Thomas Farole, 2016. "Factory Southern Africa?," World Bank Other Operational Studies 23787, The World Bank.
    14. ITOH Ryo & NAKAJIMA Kentaro, 2014. "Impact of Supply Chain Network Structure on FDI: Theory and evidence," Discussion papers 14027, Research Institute of Economy, Trade and Industry (RIETI).
    15. Tanaka, Ayumu, 2017. "Foreign direct investment and temporary workers in Japan," Journal of Asian Economics, Elsevier, vol. 48(C), pages 87-99.
    16. KONDO Keisuke, 2015. "Input-Output Linkages of Japanese Affiliates in Mexico within NAFTA," Discussion papers 15143, Research Institute of Economy, Trade and Industry (RIETI).
    17. THORBECKE, Willem & Nimesh SALIKE, 2013. "Foreign Direct Investment in East Asia," Policy Discussion Papers 13003, Research Institute of Economy, Trade and Industry (RIETI).
    18. Huang, Yanghua & Salike, Nimesh & Zhong, Feiteng, 2017. "Policy effect on structural change: A case of Chinese intermediate goods trade," China Economic Review, Elsevier, vol. 44(C), pages 30-47.
    19. ITO Tadashi, 2013. "FTA and Export Platform Foreign Direct Investment: Evidence from Japanese firm level data," Discussion papers 13100, Research Institute of Economy, Trade and Industry (RIETI).
    20. repec:bla:worlde:v:40:y:2017:i:10:p:2193-2225 is not listed on IDEAS
    21. JINJI Naoto & Xingyuan ZHANG, 2013. "Innovation in the Host Country and the Structure of Foreign Direct Investment: Evidence from Japanese multinationals," Discussion papers 13060, Research Institute of Economy, Trade and Industry (RIETI).
    22. Loretta Fung & Jin Tan Liu & Deborah L. Swenson, 2014. "Multinational Location Decisions and the Access to Imported Inputs," The Japanese Economic Review, Japanese Economic Association, vol. 65(2), pages 218-237, June.

    More about this item

    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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