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Ec Integration And Japanese Foreign Direct Investment In The Ec

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  • TADASHI YAMADA
  • TETSUJI YAMADA

Abstract

This study proposes two hypotheses to identify the cause(s) behind the short‐term cyclical Japanese manufacturing foreign direct investment in the European Community (EC) in the late 1980s and early 1990s: (i) a catch‐up process of Japanese firms in anticipation of EC single market integration in 1993 and (ii) the so‐called bubble economic phenomenon caused by the overheated economy following expansionary monetary policy in Japan in the late 1980s. Applying multinomial logit models to the data on parent firms of 283 Japanese manufacturing subsidiaries established in the EC from 1988 to 1992 reveals strong support for the bubble economy hypothesis but not for the catch‐up hypothesis. Results also show that under a bubble economy situation, tax‐related incentive policies in host countries—e.g., an investment tax allowance for foreign direct investment—are quite important in attracting Japanese firms.

Suggested Citation

  • Tadashi Yamada & Tetsuji Yamada, 1996. "Ec Integration And Japanese Foreign Direct Investment In The Ec," Contemporary Economic Policy, Western Economic Association International, vol. 14(1), pages 48-57, January.
    • Handle: RePEc:bla:coecpo:v:14:y:1996:i:1:p:48-57
    DOI: 10.1111/j.1465-7287.1996.tb00602.x
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    References listed on IDEAS

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    1. Bernhard Heitger & Jürgen Stehn, 1990. "Japanese Direct Investments in the EC ‐ Response to the Internal Market 1993?," Journal of Common Market Studies, Wiley Blackwell, vol. 29(1), pages 1-15, September.
    2. Kogut, Bruce & Chang, Sea Jin, 1991. "Technological Capabilities and Japanese Foreign Direct Investment in the United States," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 401-413, August.
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    Cited by:

    1. Kang Park, 2003. "Patterns and strategies of Foreign Direct Investment: the case of Japanese firms," Applied Economics, Taylor & Francis Journals, vol. 35(16), pages 1739-1746.
    2. Miroslav N. Jovanović, 2015. "The Economics of International Integration, Second Edition," Books, Edward Elgar Publishing, number 15166.
    3. Lotfali Agheli Kohnehshahri & Sara Emamgholi Poursefiddashti, 2006. "A Review of ECO Performance with Emphasis on FDI," Papers of the Annual IUE-SUNY Cortland Conference in Economics, in: Oguz Esen & Ayla Ogus (ed.), Proceedings of the Conference on Human and Economic Resources, pages 264-282, Izmir University of Economics.

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