Impact of supply chain network structure on FDI: Theory and evidence

Ryo Itoh and Kentaro Nakajima

No 49, HIT-REFINED Working Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: This study investigates how the structure of a supply chain network influences the FDI decisions of firms embedded in the network. We theoretically describe firms' FDI decisions through a coordination game of a fixed network with incomplete information. We show that the network effect in the equilibrium can be represented by Katz-Bonacich centrality. Firms with a larger Katz-Bonacich centrality than other firms are more likely to engage in FDI. We empirically test this prediction with disaggregated inter-firm transaction network data of 115,111 Japanese firms and confirm that the Katz-Bonacich centrality has a significantly positive, robust effect on firms' FDI engagements.

Keywords: FDI; network game; supply chain; Katz-Bonacich centrality (search for similar items in EconPapers)
JEL-codes: D20 D85 F23 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2016-03
New Economics Papers: this item is included in nep-int and nep-net
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https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/27775/wp049.pdf

Related works:
Working Paper: Impact of Supply Chain Network Structure on FDI: Theory and evidence (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hit:remfce:49

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