Networked FDI: Sales and Sourcing Patterns of Japanese Foreign Affiliates

30 Pages Posted: 16 Aug 2014

See all articles by Richard E. Baldwin

Richard E. Baldwin

University of Geneva - Graduate Institute of International Studies (HEI); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Toshihiro Okubo

University of Geneva - Graduate Institute of International Studies (HEI)

Date Written: August 2014

Abstract

This paper applies a novel empirical approach to characterising the horizontal‐ness and vertical‐ness of affiliates based on Yeaple's complex FDI concept. In its simplest form, horizontal‐ness is measured as affiliates’ local sales share while their vertical‐ness is measures as their share of non‐local sourcing of intermediates. Japanese affiliates in most sectors and nations are partly vertical and partly horizontal, but those in North American are far more ‘horizontal’ than those in the EU and Asia. Affiliates became more vertical between 1996 and 2005. A four‐way sales and sourcing split (host, home, regional and RoW) suggests that affiliates act as nodes in regional production networks – especially in Asia. We posit several hypotheses that could be tested with our empirical approach.

Suggested Citation

Baldwin, Richard E. and Okubo, Toshihiro, Networked FDI: Sales and Sourcing Patterns of Japanese Foreign Affiliates (August 2014). The World Economy, Vol. 37, Issue 8, pp. 1051-1080, 2014, Available at SSRN: https://ssrn.com/abstract=2481377 or http://dx.doi.org/10.1111/twec.12116

Richard E. Baldwin (Contact Author)

University of Geneva - Graduate Institute of International Studies (HEI) ( email )

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HOME PAGE: http://www.hei.unige.ch/~baldwin/

Centre for Economic Policy Research (CEPR)

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United Kingdom

National Bureau of Economic Research (NBER)

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Toshihiro Okubo

University of Geneva - Graduate Institute of International Studies (HEI) ( email )

PO Box 136
Geneva, CH-1211
Switzerland
+41 22 908 5900 (Phone)

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