Professor Kiyoshi Kojima's Contributions to FDI Theory: Trade, Structural Transformation, Growth, and Integration in East Asia

Professor Kojima of Hitotsubashi University is a leading Japanese economist in international economics. Two of his major ideas are reviewed: a theory of pro-trade FDI and an extended "flying-geese" theory of industrial development. Kojima's pro-trade FDI (which rests on the doctrine of comparative advantage) leads to a surprising discovery of David Ricardo's failure to see that the doctrine applies as equally to FDI flows as to trade flows. The recent phenomenon of production fragmentation is also built on the mechanism of pro-trade FDI. In Kojima's extended flying-geese theory of industrial development the sequence of imports-domestic production-exports further expands to the next phase of exports-outward FDI-imports, thereby completing a full circle from imports to imports. Its theoretical and policy implications are discussed against the backdrop of the rapid catch-up of Japan's neighboring countries that capitalize initially on inward FDI-and subsequently on outward FDI--as an engine of growth.