Global production sharing in the automobile industry : the case of Japan

Abstract

The purpose of this thesis is to contribute to the literature on global production sharing by examining the case of the Japanese automobile industry in the global context. The key hypothesis is that the unique characteristics of the production system and supplier relationships in Japan matter in determining the extent and modality of production sharing. The analysis focuses specifically on the implications of the 'following-leader' pattern (that is, parts and components suppliers following car producers) of Japanese overseas investment and of the interlocking relationships among firms (keiretsu networks).

The analysis is conducted at both the macro and micro levels. The macro-level analysis examines whether the following-leader investment and keiretsu network serve to differentiate patterns of Japan's parts and components and final trade from that of the other five major auto-producing nations (the United States, Germany, France, Italy, Sweden). The methodology involves estimating an augmented gravity model using a newly-constructed three-dimensional (country-partner-product) panel dataset. The micro-level analysis focuses on exports and imports separately. The export-side analysis examines whether the following-leader investments by Japanese suppliers substitute or complement auto parts exports from Japan. The import-side analysis probes the role of keiretsu networks through an in-depth case study of the supplier network of Toyota Motors, focusing specifically on the role of domestic and overseas parts suppliers in determining Toyota's global procurement patterns of parts and components. The analysis makes use of a unique product{u00AC}level dataset compiled from customs records.

The thesis begins with an overview of the globalisation process of the automobile industry, with emphasis on the comparative performance of Japanese automakers in the global automobile industry. Chapter 3 undertakes a comparative analysis at the macro-level to investigate unique features of global production sharing by Japanese automakers. Chapters 4 to 6 report the results of micro-level analyses. Chapter 4 provides a profile of the Japanese automobile industry with a particular focus on Toyota, including its history, management, and production networks in order to set the stage for the empirical analyses in subsequent chapters. Chapter 5 explores the effect of the following-leader investment by Japanese suppliers on auto parts exports from Japan. Chapter 6 examines how domestic and global keiretsu networks impact on auto parts imports. Chapter 7 summarises the key findings and policy implications.

A number of interesting results emerge from the analyses. First, there is clear evidence of a following-leader pattern in foreign direct investment (FDI) by Japanese auto parts suppliers, and therefore the magnitude of the relationship between Japanese auto parts exports and FDI is much smaller compared to the other major auto-producing countries. Second, the micro-level analysis shows that the following-leader investment by Japanese auto parts suppliers plays an important role in increasing exports from Japan. Third, in contrast with previous studies, there is no evidence to support the hypothesis that the domestic keiretsu network constrains auto parts imports to Japan: there seems to be a clear division of labour between local auto parts producers and their overseas counterparts operating within global automobile networks.