Industrial Groupings and Strategic FDI: Theory and Evidence / Bruce A. Blonigen, Christopher J. Ellis, Dietrich Fausten.

Format:

Book

Author/Creator:

Blonigen, Bruce A.

Contributor:

National Bureau of Economic Research.

Ellis, Christopher J.

Fausten, Dietrich.

Series:

Working Paper Series (National Bureau of Economic Research) no. w8046.

NBER working paper series no. w8046

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Industrial Groupings and Strategic FDI

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2000.

Summary:

We show that industrial ownership structures, such as keiretsu groupings in Japan, may significantly impact firms' incentives to engage in FDI. While the previous literature has mainly focused on the cost of capital advantages enjoyed by keiretsu firms, this paper examines two relatively unexplored channels by which ownership structure matters for FDI incentives. The first channel involves the direct incentives generated via standard product and factor market interactions whereby keiretsu firms with cross-ownership consider more directly the congestion effects of further FDI into a market. The second channel involves the indirect incentives generated by sharing of information across keiretsu firms which reduces entry costs for subsequent FDI. Using data on Japanese FDI activity by both keiretsu and non-keiretsu manufacturing firms, we find evidence to support the importance of the second channel (information-sharing incentives) as an explanation for firm-level FDI patterns, but not for the first channel.

Notes:

Print version record

December 2000.