Spillovers from FDI and local networks: the importance of transactional linkages and vertical keiretsu in Japan
Driffield, N.L.; Kimino, S.; Saal, D.S.
Purpose - The purpose of this paper is to explore the importance of host country networks and organisation of production in the context of international technology transfer that accompanies foreign direct investment. Design/methodology/approach - The empirical analysis is based on unbalanced panel data covering Japanese firms active in two-digit manufacturing sectors over a seven-year period. Given the self-selection problem affecting past sectoral-level studies, employing firm-level panel data is a prerequisite to provide robust empirical evidence. Findings - While Japan is thought of as being a technologically advanced country, the results show that vertical productivity spillovers from FDI occur in Japan, but that they are sensitive to technological differences between domestic firms and the idiosyncratic Japanese institutional network. FDI in vertically organised keiretsu sectors generates inter-industry spillovers through backward and forward linkages, while FDI within sectors linked to vertical keiretsu activities adversely affects domestic productivity. Overall, our results suggest that the role of vertical keiretsu is more prevalent than that of horizontal keiretsu. Originality/value - Japan’s industrial landscape has been dominated by institutional clusters or networks of inter-firm organizations through reciprocated, direct, and indirect ties. However, interactions between inward investors and such institutionalised networks in the host economy are seldom explored. We investigate the role and characteristics of local business groups, in the form of keiretsu networks, to determine the scale and scope of spillovers from inward FDI to Japanese establishments. This conceptualisation depends on the institutional mechanism and the market structure through which host economies absorb and exploit FDI.
Driffield, N., Kimino, S., & Saal, D. (2014). Spillovers from FDI and local networks: the importance of transactional linkages and vertical keiretsu in Japan. Multinational Business Review, 22(2), 176-193. https://doi.org/10.1108/mbr-01-2014-0004
|Journal Article Type
|Online Publication Date
|Jul 15, 2014
|Jul 15, 2014
|Jun 4, 2014
|Publicly Available Date
|Jun 20, 2014
|Multinational Business Review
Accepted Journal Article
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