Export Platforms and the Industry-Specific FDI-Trade Relationship

This paper examines how the industry-level FDI-export sales relationship is affected by the host nation’s status as an “export platform” (EP). Using Japanese FDI and export sales data into 35 host countries during the period 1989-1998 for 7 ISIC 2-digit industries, we find that the FDI-export sales relationship is industry-specific and sensitive to the host’s export platform status. Without accounting for the host’s EP status, we find a complementary relationship between FDI and export sales in some industries and a substitution between FDI and export sales in others. However, accounting for the host’s EP status changes the FDI-export sales relationship in several industries, implying that the FDI-export sales interaction is sensitive to the EP status of the FDI host countries.