ABSTRACT This study examines whether stronger integration with Japan‐related global value chains ( GVCs ) promotes foreign direct investment ( FDI ) inflows from Japan in Asian developing countries. Using sector‐level data on Japanese FDI inflows to nine Asian developing economies from the Bank of Japan and GVC indicators from the UNCTAD ‐Eora GVC Database, the paper analyses the machinery and non‐machinery sectors separately. The benchmark‐period results for 2005–2017 show that stronger backward linkages with Japan are positively associated with higher FDI inflows in both sectors, while forward linkage matters mainly in the machinery sector. The positive role of backward linkage is also stronger in countries with better institutional quality. When the sample is extended to 2022, the relationship remains more persistent in machinery but weakens in non‐machinery activities after 2018. The results suggest that the GVC ‐ FDI relationship is sector‐specific, institutionally conditioned and not equally stable under the post‐2018 external environment.
Jun Zhao (Thu,) studied this question.