Complex vertical FDI and firm heterogeneity: Evidence from East Asia

Kazunobu Hayakawa, Toshiyuki Matsuura

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9 Citations (Scopus)

Abstract

This study statistically tests the validity of the mechanics of complex vertical foreign direct investment (C-VFDI) in Japanese machinery FDI to East Asia by estimating a multiple-spatial lag model. From a theoretical perspective regarding C-VFDI, the production activity of affiliates in a given country is positively related to the production activity in neighboring countries that have large differences in factor prices with the given country. Furthermore, high-productivity firms are likely to choose a C-VFDI strategy. Our empirical results show no robust geographical relationship among affiliates' activities. However, the significantly positive relationship in wage differentials among those activities is found only for high-productivity firms.

Original languageEnglish
Pages (from-to)273-289
Number of pages17
JournalJournal of the Japanese and International Economies
Volume25
Issue number3
DOIs
Publication statusPublished - 2011 Sep

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Keywords

  • Complex VFDI
  • Spatial lag model
  • Third-country effects

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance
  • Political Science and International Relations

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