Overseas Production Expansion and Domestic Transaction Networks

Author Name HAYAKAWA Kazunobu (IDE, JETRO) / MATSUURA Toshiyuki (Keio University)
Creation Date/NO. May 2017 17-E-085
Research Project Regional Economies in the New Era of Globalization and Informatization
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In this study, we empirically examine the effects of customers' foreign direct investment (FDI) on their domestic transaction ties and the performance of their suppliers. In particular, we examine the difference in such effects between the first- (direct) and second-tier (indirect) suppliers. To this end, we utilize a unique firm-level survey in Japan that contains information on inter-firm transaction networks matched with FDI data. Our findings can be summarized as follows. There is no evidence that customers' FDI is more likely to suspend their domestic transactions. Rather, direct suppliers' transaction ties with multinational enterprises (MNEs) are more persistent than those with other firms. Although such an effect becomes weak for transactions between direct and indirect suppliers, we did not find a negative effect. Furthermore, customers' FDI has a significantly positive impact on employment growth for both their direct and indirect suppliers.