Foreign Investment and International Plant Configuration: Whither the Product Cycle?
We analyze the determinants of the decision to invest abroad in particular configurations of overseas plants for 120 Japanese firms active in 36 well-defined electronic product markets. We find support for a structured internationalization decision model in which the decision to produce abroad and the choice for a specific international plant configuration are treated as nested strategic options. Drivers at the industry and firm level push firms to consider overseas investment, and locational characteristics pull firms towards particular plant configurations. The product cycle still appears as an important force pushing firms to set up Asia-focused or global plant configurations. In contrast, plant configurations focused on the US and the EU are a result of restrictive trade policies or offensive market access considerations vital to technology intensive firms facing competitive threats in foreign markets.
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