Business groups, foreign direct investment, and capital goods trade: The import behavior of Japanese affiliates

Belderbos, René, Wakasugi, Ryuhei and Zou, Jianglei (2010). Business groups, foreign direct investment, and capital goods trade: The import behavior of Japanese affiliates. UNU-MERIT.

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  • Author Belderbos, René
    Wakasugi, Ryuhei
    Zou, Jianglei
    Title Business groups, foreign direct investment, and capital goods trade: The import behavior of Japanese affiliates
    Publication Date 2010
    Publisher UNU-MERIT
    Abstract We examine the impact of buyer-supplier relationships within business group on capital goods trade in the context of foreign direct investment by buyer firms and capital goods producers. A simple model in which cost-reducing relationship specific investments are underlying business group ties suggests that 1) foreign affiliates of business group firms have a greater propensity to import capital goods from the home country, increasing Japanese exports 2) if the establishment of overseas affiliates by business groups firms attracts FDI by their capital goods suppliers, the 'trade creating' impact of business group ties may disappear or even be reversed. Empirical analysis of capital goods imports by 1790 manufacturing affiliates operated abroad by Japanese multinational firms in 1996 provides broad support for these predictions and demonstrates a sizeable impact of buyer-supplier ties in business groups on trade. Affiliates of member firms of horizontal and vertical business groups with supplier ties exhibit a greater propensity to import from Japan, but this impact is mitigated or transformed into a smaller import propensity if the groups' capital goods producers have substantial manufacturing investments abroad. Running head: Business groups, FDI and capital goods trade
    Keyword Multinational firms
    Imports
    Capital goods
    FDI
    Business groups
    JEL F23
    F14
    D21
    Copyright Holder UNU-MERIT
    Copyright Year 2010
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    Created: Wed, 11 Dec 2013, 17:24:37 JST