Foreign direct investment and vertical integration of production by Japanese multinationals in Thailand

摘要

We test the vertical model of foreign direct investment (FDI) empirically using firm level information on Japanese multinational activity in Thailand. These data allow us to investigate the effects of both home country (Japan) and host country (Thailand) characteristics on the inter-industry pattern of FDI. For 85 manufacturing industries over the period from 1985 to 1995. we find a positive influence of industry variation in skill intensity and market size in the host country and a negative effect of transport costs on the amount of FDI. These results provide strong direct econometric evidence of vertical integration of production across the countries.