Technological Capability and FDI in Asia: Firm-level Relationships among Japanese Manufacturers *

Eiichi Tomiura

Asian Economic Journal, 2005, vol. 19, issue 3, pages 273-289

Abstract: The present paper reexamines the relationship between technological capabilities and FDI decisions at the firm level. The data cover 118 300 Japanese firms in all manufacturing industries. The R&D of Japanese firms has a noticeably weaker relationship with FDI in Asia than with FDI in industrial countries. This finding is confirmed to be robust even when alternative estimation techniques are used and when R&D expenditure data are replaced by patent data. The estimation results also reveal non-negligible fixed entry costs for FDI, a finding consistent with the observation that only approximately 2 percent of the firms invest abroad. Copyright 2005 East Asian Economic Association.

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