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Foreign Investment, Divestment and Relocation by Japanese Electronics Firms in East Asia *
Author(s) -
Belderbos René,
Zou Jianglei
Publication year - 2006
Publication title -
asian economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.345
H-Index - 28
eISSN - 1467-8381
pISSN - 1351-3958
DOI - 10.1111/j.1467-8381.2006.00222.x
Subject(s) - divestment , relocation , foreign direct investment , china , rivalry , multinational corporation , international economics , inward investment , business , international trade , east asia , economics , investment (military) , finance , political science , politics , computer science , law , macroeconomics , programming language
Although foreign divestment and international relocation by multinational firms carry important economic implications for the industrialization of East Asian countries, there has been little empirical research on these issues. In this paper we analyze the magnitude and pattern of foreign divestment and relocation by Japanese electronics firms in nine East Asian countries during 1995–2003. The average annual divestment rate of electronics manufacturing affiliates is 3 percent, but divestment patterns diverge strongly across countries. Divestments are much more frequent in higher labor cost countries and in approximately one‐third of cases are accompanied by relocations to lower wage countries, particularly to China. Evidence is found for rivalry between China and ASEAN countries in attracting foreign direct investment, but the growing attractiveness of China has not been accompanied by a reduction in employment in Japanese affiliates in ASEAN countries (with the exception of Singapore). Divestments and relocations are related to Japanese firms’ strategy to reconfigure their Asian production networks in response to changing competitiveness, regional integration, and changes in local investment environments.