Kazunobu Hayakawa, Toshiyuki Matsuura, 09 July 2017

Foreign direct investment has generally been found to have positive effects for firms in their home country. There are, however, concerns about potential negative effects for other domestic firms in the investing firm’s supply chain. This column uses Japanese firm-level data to explore the supply chain effects of foreign direct investment. Foreign direct investment does not appear to have adverse effects on domestic transaction networks. Rather, the positive effects of firms’ foreign investing are found to spread to the whole economy through their supply chains.

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