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Understanding Foreign Direct Investment in East Asia

  • Thorbecke, Willem

    (Asian Development Bank Institute)

  • Salike, Nimesh

    (Asian Development Bank Institute)

The authors recount East Asia’s experience with foreign direct investment (FDI). They document that, contrary to the Rybczynski theorem, capital flows in the region cause the host country’s labor-intensive industry to expand and its capital-intensive industry to decline. They also present narrative evidence that sheds light on how FDI is affected by the host’s country’s locational advantages, whether Asian FDI is footloose, and how the PRC has become the center of Factory Asia. Finally, they show that the evolution of production networks in the region can be explained partly by changes in the service cost of linking geographically separated production blocks relative to the cost saving arising from slicing up the value chain.

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File URL: http://www.adbi.org/files/2011.06.23.wp290.foreign.direct.investment.east.asia.pdf
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Paper provided by Asian Development Bank Institute in its series ADBI Working Papers with number 290.

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Length: 21 pages
Date of creation: 24 Jun 2011
Date of revision:
Handle: RePEc:ris:adbiwp:0290
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  1. Kojima, Kiyoshi, 1973. "A Macroeconomic Approach to Foreign Direct Investment," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 14(1), pages 1-21, June.
  2. Hayakawa, Kazunobu & Kimura, Fukunari, 2009. "The effect of exchange rate volatility on international trade in East Asia," Journal of the Japanese and International Economies, Elsevier, vol. 23(4), pages 395-406, December.
  3. Kimura, Fukunari & Obashi, Ayako, 2011. "Production Networks in East Asia: What We Know So Far," ADBI Working Papers 320, Asian Development Bank Institute.
  4. Theodore H. Moran, 2011. "Foreign Direct Investment and Development: Launching a Second Generation of Policy Research: Avoiding the Mistakes of the First, Reevaluating Policies for Developed and Developing Countries," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 6000, March.
  5. ITO Takatoshi & KOIBUCHI Satoshi & SASAKI Yuri & SATO Kiyotaka & SHIMIZU Junko & HAYAKAWA Kazunobu & YOSHIMI Taiyo, 2008. "Currency Invoicing and Foreign Exchange Risk Management: A Case Study of Japanese Firms (Japanese)," Discussion Papers (Japanese) 08009, Research Institute of Economy, Trade and Industry (RIETI).
  6. Ayako Obashi, 2008. "Stability of Production Networks in East Asia: Duration and Survival of Trade," Keio/Kyoto Joint Global COE Discussion Paper Series 2008-002, Keio/Kyoto Joint Global COE Program.
  7. Daisuke Hiratsuka, 2011. "Production Networks in Asia : A Case Study from the Hard Disk Drive Industry," Microeconomics Working Papers 23235, East Asian Bureau of Economic Research.
  8. THORBECKE, Willem, 2008. "The Effect of Exchange Rate Volatility on Fragmentation in East Asia: Evidence from the Electronics Industry," Discussion papers 08016, Research Institute of Economy, Trade and Industry (RIETI).
  9. Guillaume Gaulier & Françoise Lemoine & Deniz Ünal, 2011. "China's Foreign Trade in the Perspective of a More Balanced Economic Growth," Working Papers 2011-03, CEPII research center.
  10. Kojima, Kiyoshi, 1975. "International Trade and Foreign Investment : Substitutes or Complements," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 16(1), pages 1-12, June.
  11. Kimura, Fukunari & Ando, Mitsuyo, 2005. "Two-dimensional fragmentation in East Asia: Conceptual framework and empirics," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 317-348.
  12. Kojima, Kiyoshi, 1977. "Transfer of Technology to Developing Countries -Japanese Type versus American Type-," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 17(2), pages 1-14, February.
  13. Wignaraja, Ganeshan, 2008. "FDI and Innovation as Drivers of Export Behaviour: Firm-level Evidence from East Asia," MERIT Working Papers 061, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  14. John H Dunning, 1988. "The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions," Journal of International Business Studies, Palgrave Macmillan, vol. 19(1), pages 1-31, March.
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