NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Vertical Networks and US Auto Parts Exports: Is Japan Different?

Keith Head, John Ries, Barbara J. Spencer

NBER Working Paper No. 9162
Issued in September 2002
NBER Program(s):   ITI

This paper develops a model in which upstream network insiders' conduct relationship specific investment that induces the downstream firm to transact within networks. The scale of destination-country production and part-specific measures of the importance of network relationships and engineering costs are used to explain the pattern of U.S. auto parts exports. Our results support the prediction that large scale promotes relationship-specific investment and reduces imports. Also, while Japan is a large parts importer, the composition of its imports is shifted away from parts where vertical keiretsu are prominent. Nations hosting U.S.-owned automakers import more U.S. parts.

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Document Object Identifier (DOI): 10.3386/w9162

Published: Keith Head & John Ries & Barbara J. Spencer, 2004. "Vertical Networks and US Auto Parts Exports: Is Japan Different?," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 13(1), pages 37-67, 03.

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