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Overseas Investment and Firm Exports
Author(s) -
Head Keith,
Ries John
Publication year - 2001
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.00267
Subject(s) - ceteris paribus , complementarity (molecular biology) , economics , foreign direct investment , panel data , investment (military) , monetary economics , sample (material) , international trade , international economics , business , microeconomics , macroeconomics , econometrics , politics , political science , law , chemistry , genetics , chromatography , biology
A firm can serve overseas customers by exporting or by producing in the foreign market. Thus, ceteris paribus , one might expect increases in overseas investment to displace exports. However, most empirical work has found a positive relation between the two variables. The authors use a panel dataset containing 25 years’ of data on 932 Japanese manufacturing firms to investigate the effect direct investment abroad has on exports. For the full sample of firms, complementarity is found. The relationship, however, varies across firms. Those that are unlikely to ship intermediates to overseas production affiliates exhibit substitution.