Industrial Groupings and Strategic FDI: Theory and Evidence
We show that industrial ownership structures, such as keiretsu groupings in Japan, may significantly impact firms' incentives to engage in FDI. While the previous literature has mainly focused on the cost of capital advantages enjoyed by keiretsu firms, this paper examines two relatively unexplored channels by which ownership structure matters for FDI incentives. The first channel involves the direct incentives generated via standard product and factor market interactions whereby keiretsu firms with cross-ownership consider more directly the congestion effects of further FDI into a market. The second channel involves the indirect incentives generated by sharing of information across keiretsu firms which reduces entry costs for subsequent FDI. Using data on Japanese FDI activity by both keiretsu and non-keiretsu manufacturing firms, we find evidence to support the importance of the second channel (information-sharing incentives) as an explanation for firm-level FDI patterns, but not for the first channel.
|Date of creation:||Dec 2000|
|Publication status:||published as Blonigen, Bruce A., Christopher J. Ellis and Dietrich Fausten. "Industrial Groupings And Strategic FDI," Japan and the World Economy, 2005, v17(2,Apr), 125-150.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Christopher J. Ellis & Dietrich Fausten, 2002. "Strategic FDI and industrial ownership structure," Canadian Journal of Economics, Canadian Economics Association, vol. 35(3), pages 476-494, August.
- Kimura, Yui & Pugel, Thomas A., 1995. "Keiretsu and Japanese direct investment in US manufacturing," Japan and the World Economy, Elsevier, vol. 7(4), pages 481-503, November.
- Kogut, Bruce & Chang, Sea Jin, 1991. "Technological Capabilities and Japanese Foreign Direct Investment in the United States," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 401-413, August.
- James A. Dorn, 1999. "Introduction," Cato Journal, Cato Journal, Cato Institute, vol. 18(3), pages 311-320, Winter.
- Takeo Hoshi & Anil Kashyap & David Scharfstein, 1991.
"Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 106(1), pages 33-60.
- Takeo Hoshi & Anil K. Kashyap & David Scharfstein, 1989. "Corporate structure, liquidity, and investment: evidence from Japanese industrial groups," Finance and Economics Discussion Series 82, Board of Governors of the Federal Reserve System (U.S.).
- Bruce A. Blonigen & Robert C. Feenstra, 1997. "Protectionist Threats and Foreign Direct Investment," NBER Chapters, in: The Effects of U.S. Trade Protection and Promotion Policies, pages 55-80 National Bureau of Economic Research, Inc.
- Bruce A. Blonigen & Robert C. Feenstra, "undated". "Protectionist Threats And Foreign Direct Investment," Department of Economics 96-01, California Davis - Department of Economics.
- Robert Feenstra & Bruce A. Blonigen & Harris Dellas, 2003. "Protectionist Threats and Foreign Direct Investment," Working Papers 961, University of California, Davis, Department of Economics.
- Bruce A. Blonigen & Robert C. Feenstra, 1996. "Protectionist Threats and Foreign Direct Investment," NBER Working Papers 5475, National Bureau of Economic Research, Inc.
- Flath, David, 1996. "The Keiretsu Puzzle," Journal of the Japanese and International Economies, Elsevier, vol. 10(2), pages 101-121, June.
- Feenstra, Robert C. & Rauch, James E., 1999. "Symposium on business and social networks in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 1-1, June.
- Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
- Robert C. Feenstra & Gordon H. Hanson, 1995. "Foreign Direct Investment and Relative Wages: Evidence from Mexico's Maquiladoras," NBER Working Papers 5122, National Bureau of Economic Research, Inc.
- Belderbos, Rene & Sleuwaegen, Leo, 1996. "Japanese Firms and the Decision to Invest Abroad: Business Groups and Regional Core Networks," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 214-220, May.
- J. E. Stiglitz, 1999. "Introduction," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 28(3), pages 249-254, November.
- Flath, David, 1993. "Shareholding in the Keiretsu, Japan's Financial Groups," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 249-257, May.
- Kogut, Bruce & Chang, Sea Jin, 1996. "Platform Investments and Volatility Exchange Rates: Direct Investment in the U.S. by Japanese Electronic Companies," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 221-231, May.
- Suzuki, Kazuyuki, 1993. "R&D spillovers and technology transfer among and within vertical keiretsu groups : Evidence from the Japanese electrical machinery industry," International Journal of Industrial Organization, Elsevier, vol. 11(4), pages 573-591.
- Ping Lin & Kamal Saggi, 1999. "Incentives for Foreign Direct Investment under Imitation," Canadian Journal of Economics, Canadian Economics Association, vol. 32(5), pages 1275-1298, November.
- René Belderbos, 1997. "Antidumping and tariff Jumping: Japanese firms’ DFI in the European union and the United States," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 133(3), pages 419-457, September. Full references (including those not matched with items on IDEAS)