Changing determinants of Japanese foreign investment in the United States

Abstract

Japan's changing share of new foreign investments in the United States is analyzed in a panel data set (1975–1986) to obtain the following conclusions: (1) Japanese R&D spending exerts an increasingly positive effect on the country's foreign investment; (2) in the 1980s Japan's share became positively related to advertising intensity; (3) foreign investment follows upon Japan's export successes and is increased by U.S. trade restrictions; and (4) foreign investment behaves as arbitrage in response to movements in real effective exchange rates.