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, JiangleiTitle 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 groupsJEL F23
F14
D21Copyright Holder UNU-MERIT Copyright Year 2010 -
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