Distribution Keiretsu, Foreign Direct Investment, and Import Penetration in Japan

David Flath ()

Japanese Economy, 2005, vol. 33, issue 2, 26-53

Abstract: Directed marketing channels--known in Japan as distribution keiretsu--are more likely than others to be headed by a primary wholesaler that is vertically integrated with the manufacturer, which for foreign manufacturers entails their directly investing in Japan-based wholesale subsidiaries. I support this statement with empirical evidence and theoretical reasoning. Briefly stated, vertical integration better aligns the noncontractible wholesaler effort levels with the manufacturer's profit, but necessarily forgoes the inherent advantage of an independent wholesaler at market-widening efforts. This establishes a trade-off bearing on the decision to vertically integrate. Where market-widening efforts complicate the resolution of retail externalities, it can be better to forgo market-widening efforts altogether and instead focus exclusively on resolving the externalities, vertically integrating with the wholesaler in order to better administer a distribution keiretsu.

Date: 2005
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/2329194X.2005.11045214 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mes:jpneco:v:33:y:2005:i:2:p:26-53

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MJES19

DOI: 10.1080/2329194X.2005.11045214

Access Statistics for this article

More articles in Japanese Economy from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().