The effect of horizontal multinational activity on vertical multinational activity: The case of the Japanese automobile industry

This dissertation explores the multinational activity of Japanese automobile industry by focusing on the vertical production structure of a firm. The main objective is to analyze the effect of horizontal multinational activity on vertical multinational activity. First, we construct a partial and a general equilibrium model. Both models predict that the increase in horizontal multination activity leads to an increase in already existing vertical multinational activity. This result mainly comes from the increased flow of intermediate products. Second, by applying annual data for the Japanese automobile industry from 1982 to 1997, we estimate an equation from the partial equilibrium model. The estimated results show the complementary relationship between horizontal and vertical multinational activity, which supports the results of both theoretical models.