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Vertical Networks and US Auto Parts Exports: Is Japan Different?

  • Keith Head
  • John Ries
  • Barbara J. Spencer

This paper develops a model in which upstream network insiders' conduct relationship specific investment that induces the downstream firm to transact within networks. The scale of destination-country production and part-specific measures of the importance of network relationships and engineering costs are used to explain the pattern of U.S. auto parts exports. Our results support the prediction that large scale promotes relationship-specific investment and reduces imports. Also, while Japan is a large parts importer, the composition of its imports is shifted away from parts where vertical keiretsu are prominent. Nations hosting U.S.-owned automakers import more U.S. parts.

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File URL: http://www.nber.org/papers/w9162.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9162.

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Date of creation: Sep 2002
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Publication status: published as Keith Head & John Ries & Barbara J. Spencer, 2004. "Vertical Networks and US Auto Parts Exports: Is Japan Different?," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 13(1), pages 37-67, 03.
Handle: RePEc:nbr:nberwo:9162
Note: ITI
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  1. K.C. Fung, 1991. "Characteristics of Japanese Industrial Groups and Their Potential Impact on U. S . - Japanese Trade," NBER Chapters, in: Empirical Studies of Commercial Policy, pages 137-168 National Bureau of Economic Research, Inc.
  2. Asanuma, Banri, 1989. "Manufacturer-supplier relationships in Japan and the concept of relation-specific skill," Journal of the Japanese and International Economies, Elsevier, vol. 3(1), pages 1-30, March.
  3. Gary R. Saxonhouse, 1993. "What Does Japanese Trade Structure Tell Us about Japanese Trade Policy?," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 21-43, Summer.
  4. Larry D. Qiu & Barbara J. Spencer, 2001. "Keiretsu and Relationship-Specific Investment: Implications for Market-Opening Trade Policy," NBER Working Papers 8279, National Bureau of Economic Research, Inc.
  5. Saxonhouse, Gary R, 1976. "Estimated Parameters as Dependent Variables," American Economic Review, American Economic Association, vol. 66(1), pages 178-83, March.
  6. Yoshiro Miwa & J. Mark Ramseyer, 2000. "Rethinking Relationship-Specific Investments: Subcontracting in the Japanese Automobile Industry," CIRJE F-Series CIRJE-F-70, CIRJE, Faculty of Economics, University of Tokyo.
  7. Spencer, Barbara J & Qiu, Larry D, 2001. "Keiretsu and Relationship-Specific Investment: A Barrier to Trade?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 871-901, November.
  8. Thomas H. Klier, 1994. "Lean manufacturing and the decision to vertically integrate: some empirical evidence from the U.S. automobile industry," Working Paper Series, Regional Economic Issues 94-1, Federal Reserve Bank of Chicago.
  9. Casadesus-Masanell, Ramon & Spulber, Daniel F, 2000. "The Fable of Fisher Body," Journal of Law and Economics, University of Chicago Press, vol. 43(1), pages 67-104, April.
  10. James E. Rauch, 2001. "Business and Social Networks in International Trade," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1177-1203, December.
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