Understanding FDI and production networks in East Asia

Willem Thorbecke, Nimesh Salike

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)


We provide evidence from the electronics industry in East Asia supporting Kojima's (1973) hypothesis that FDI moves from capital-exporting countries' disadvantaged industries into host countries' advantaged industries. These results imply that FDI and trade are complementary, unlike in Mundell's (1957) model where they are substitutes. The results also indicate that exchange rate volatility deters trade, implying that reductions in the service link costs between production blocks can promote fragmentation. These findings imply that host countries in East Asia can receive technology transfers by lowering service link costs.

Original languageEnglish
Pages (from-to)57-71
Number of pages15
JournalAsian-Pacific Economic Literature
Issue number2
Publication statusPublished - 1 Nov 2016


  • East Asia
  • Kojima model
  • Mundell model
  • foreign direct investment
  • production networks
  • service link cost
  • trade


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