Template-type: ReDIF-Paper 1.0
Author-Name: Belderbos, Rene
Author-Email: r.belderbos@maastrichtuniversity.nl 
Author-Workplace-Name: UNU-MERIT, Maastricht University, and Katholieke
	 Universiteit Leuven
Author-Name: Wakasugi, Ryuhei
Author-Email: wakasugi@kier.kyoto-u.ac.jp
Author-Workplace-Name: University of Kyoto
Author-Name: Zou, Jianglei
Author-Email: jianglei.zou@gmail.com
Author-Workplace-Name: ABN AMRO Bank
Title: Business groups, foreign direct investment, and capital goods trade: The import 
	 behavior of Japanese affiliates
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.
Classification-JEL: F23, F14, D21
Keywords: : Multinational firms, imports, capital goods, FDI, business groups   
Series: UNU-MERIT Working Papers
Creation-Date: 2010
Number: 066
File-URL: http://www.merit.unu.edu/publications/wppdf/2010/wp2010-066.pdf
File-Format: application/pdf
File-Size: 275 Kb
Handle: RePEc:unm:unumer:2010066