Economic Partnership Agreement Mexico-Japan and Its Impact on Foreign Direct Investment: A Strategic Analysis

Economic Partnership Agreement Mexico-Japan and Its Impact on Foreign Direct Investment: A Strategic Analysis

José G. Vargas-Hernández (University of Guadalajara, Mexico)
Copyright: © 2018 |Pages: 21
DOI: 10.4018/978-1-5225-2673-5.ch014
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Abstract

This chapter is intended to analyze the advantages to associate with a developing country like México from the perspective of the theories of the Agency, Institutional, Resource-based Theory and the Theory of Transaction Costs. Generally, FDI contributes to capital formation, expansion and diversification of exports, increasing competition, provide access to top technology and improving management systems. Mexico is of the largest FDI recipients within the developing countries. Japan, on the other hand, is one of the largest sources of FDI worldwide, and is gaining a larger share in the Mexican FDI context since the onset of the Economic Partnership Agreement. In this paper, factors that might lead to the depletion of productive spillovers from Japanese manufacturing companies are reviewed from a qualitative perspective. The analysis suggests that inefficiencies in endogenous companies; and Japanese companies being part of firm networks (keiretsu), might lead to productive spillovers depletion.
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Background

After the problems of commercial banks from the 80's, due to the difficulty of attracting capital to develop projects, many countries eased restrictions on the entry of foreign direct investment (FDI). For this, developing countries resorted to various measures to attract FDI. Governments in developing countries see on FDI the possibility of accelerating the economic growth of their countries through economic spills and knowledge transfers (Carkovic, and Levine, 2002). These economic spills can occur within the same industry or inter-industrial way.

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