008 自由論題

【自由論題セッション】

Empirical analysis of Japanese FDI strategies:
Network production approach
Sun Qiwei (Shiga University)
Foreign direct investment (FDI) is the overseas expansion of companies for long-term management
activities. Traditionally foreign direct investment is mainly divided into horizontal and vertical direct
investment, which have been enormously helpful in describing multinationals’ motivations of FDI. As
shown in recent literature, however, FDI patterns which cannot be interpreted as vertical or horizontal
FDI are increasing in the past decade and they find that FDI strategies of multinationals differ byregion and industry. It has great significance to clarify the multinationals’ FDI patterns in considering
the FDI policy, especially the inward direct investment policy, which is considered important foreconomic growth. In this study, I will clarify the FDI patterns of Japanese multinationals, which isconductive to enhancing the competitiveness of Japan and Japanese multinationals.
More recent empirical work reveals that it is difficult to interpret FDI with the two-country (homecountry and host country) division. Gordon, Raymond, & Matthew (2001) find that the U.S. datashows evidence of both types of FDI and U.S. multinationals tailor their entry strategies to reflect hostcountry conditions, which has been extremely useful in understanding broad patterns of multinational
behavior. To verify such trends of multinationals outside U.S., furthermore, studies on other regions
are necessary. This study, as a supplement to research map on new findings of FDI patterns, analyzes
the economic activities of foreign affiliates of Japan which is regarded as a leading investment countryof Asia where FDI is active, to clarify the Japanese FDI characteristics.
Yeaple (2003) analyzes the determinants of complex integration strategies using a three-country
model and revels that the strategy is affected by interdependencies across countries, which varies withindustry characteristics and is important to understanding the structure of FDI. Another representative
theoretical model study on the choice of FDI strategy is by Grossman, Helpman, & Szeidl (2006).
They study on optimal integration strategies of firms differ in their productivity levels and revel theimportant role that industry characteristics play in determining the optimal integration strategies. The
two representative studies on FDI strategies analyze why firms might follow a strategy of complex
integration and reveal the importance of interdependencies across countries and industry
characteristics on the integration strategy. They are of great significance for understanding andpredicting the FDI of MNEs. Given the potential for such cross-country dependencies, empirical work
should be given greater consideration to verify the theoretical findings with evidence.
More recent literature, Baldwin & Okubo (2014)-looking at the trade behavior of multinationals’008 自由論題

foreign affiliates-classify FDI patterns by sales and sourcing ratio shown in the sales-sourcing box, anovel methodology, which provides new perspective for understanding of network production. They
open the door to do empirical research by focusing on the sales and sourcing patterns of affiliates.
I do empirical work to clarify the effect of network production and supply chain on Japanese FDI
using an extended estimating equation based on gravity model from the literature. Here, regressions
are estimated on data aggregated over affiliates located in 18 countries and regions in three major hostregions, Asia, North America, and Europe, by nation by industry, from 1995 to 2006. Here, the dataof the survey called “The Survey on Overseas Business Activities” as tracked by METI, wasreprocessed by Research Institute of Economy, Trade and Industry (RIETI). I carried out empirical
study focusing on manufacturing in three main regions.
As expected theoretically, I find evidence of network production from source side in Europe, but noevidence from sales side in sample period. Also, I find that the access to local market is still attractive
to FDI in Asia and Europe, which, on the other hand, is not found in North America. It suggests thatJapanese affiliates follow diverse FDI strategies in different host regions. My results show the evidenceof network production regionally, which appears to be an important part of the overall picture of FDI
in 21st century. And they also suggest that the local market seems to be still an important factor formultinational firms’ overseas expansion in 1995-2006, which is consistent with the standard view ofhorizontal FDI that it is oriented towards producing goods for the host-country market.

References
Baldwin, R., & Okubo, T. (2014). Networked FDI: Sales and Sourcing Patterns of Japanese Foreign
Affiliates. The World Economy.
Gordon, H. H., Raymond, M. J., & Matthew, S. J. (2001). Expansion Strategies of U.S.
Multinational Firms. Washington, D.C.: The Brookings Trade Forum 2001.
Grossman, G. M., Helpman, E., & Szeidl, A. (2006). Optimal integration strategies for themultinational firm. Journal of International Economics 216– 238.
Yeaple, S. R. (2003). The complex integration strategies of multinationals and cross countrydependencies in the structure of foreign direct investment. Journal of International Economics 60, 293–314.