Keiretsu and relationship-specific investment : a barrier to trade?

Barbara J. SPENCER, Larry D. QIU

Research output: Journal PublicationsJournal Article (refereed)

27 Citations (Scopus)

Abstract

This article develops a model of informal procurement within Japanese keiretsu so as to consider effects on intermediate‐good imports, such as auto parts. Parts‐suppliers make relationship‐specific investments that benefit the automaker and prices are determined by bargaining after investment has been sunk. Although this investment raises efficiency, it limits the range of imports to less important parts, such as tailpipes, and it is possible that no parts are imported, despite lower foreign costs. Lack of information concerning investment rents combined with counterintuitive responses of imports to changes in output and costs could create unwarranted perceptions of a trade barrier.
Original languageEnglish
Pages (from-to)871-901
Number of pages31
JournalInternational Economic Review
Volume42
Issue number4
DOIs
Publication statusPublished - Nov 2001
Externally publishedYes

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Bibliographical note

This article has benefited from presentation at the 1999 ITI Summer Institute, the 1999 SCIIE Conference at Santa Cruz (Nirvikar Singh discussant), the Australian National University, University of Sydney, Kobe University, the Chinese University of Hong Kong, the City University of Hong Kong, and the Faculty of Commerce, University of British Columbia. The authors gratefully acknowledge financial support from the Social Sciences and Humanities Research Council of Canada.

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