Tariff jumping DFI and export substitution: Japanese electronics firms in Europe

Analysis of micro data on Japanese electronics firms establishes that the rapid increase in Japanese manufacturing investments in the late 1980s has for a substantial part been induced by EC antidumping and other trade restricting measures targeting Japanese firms. Evidence is found at the firm level that such 'tatiff jumping' investment has substituted for exports from Japan. On the other hand, firms which invested in EC distribution activities, acquired EC firms, or produce components within a vertical Keiretsu, export relatively more to Europe. The latter finding suggests that subcontractor firms were able to expand components exports by supplying the European manufacturing plants of their parent firms. (C) 1998 Elsevier Science B.V.