UNDERSTANDING AND PREDICTING THE FOREIGN DIRECT INVESTMENT BEHAVIOR OF ANCILLARY FIRMS : The case of Japanese ancillary firms affiliated to Mazda Motor Corp.

Many studies have pointed the strength of inter-firm linkages on the Foreign Direct Investment (FDI) behavior of Japanese ancillary firms. The analysis in this conceptual paper seeks to provide a possible extension of conventional explanation of foreign location behavior of Japanese ancillary firms by emphasizing the importance of detailed empirical understanding of which aspects of buyer-supplier relationship are more likely to influence the FDI decision of the ancillary firms in response to home-country buyer's foreign expansion. This analysis supports the premise that Japanese automotive suppliers have some discretion in complying with the norms that apply to domestic environment but also face constraints due to dependence on links with only home-country buyers. Documentary evidence and eight interviews with executives of auto-parts suppliers are used to develop analytical framework and a number of propositions that represent the vector of forces that suggest a firm being more alert to changes in industrial landscape are presented.