Cross-Investment: A Second Front of Economic Rivalry

Everyone knows that Japan has profited for more than a decade from a continuous trade surplus with the U.S. However, Japan has also become a large capital exporter—with America, previously a major capital exporter, now being a principal recipient. Japanese investments in the U.S. take many forms and...

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Bibliographic Details
Published in:California management review 1987, Vol.29 (2), p.20-48
Main Author: Encarnation, Dennis J.
Format: Article
Language:English
Subjects:
American
Automobile manufacturers
Economic policy
Economic relations
Financial investments
Foreign direct investments
Foreign investment
Foreign investments
Foreign subsidiaries
INTERNATIONAL COMPETITION
International trade
Investment policy
Investors
Japan
Japanese
Market penetration
Policy making
Protectionism
Restrictions
Semiconductors
Subsidiary companies
United States
US exports
US imports
Wholesale trade
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Summary:Everyone knows that Japan has profited for more than a decade from a continuous trade surplus with the U.S. However, Japan has also become a large capital exporter—with America, previously a major capital exporter, now being a principal recipient. Japanese investments in the U.S. take many forms and have been growing rapidly. In fact, Japan has become America's third largest foreign investor. Like trade competition, this second front of economic rivalry represents an increasingly formidable Japanese challenge to U.S. business—now mounted on America's home grounds. On the other side, by 1983, only Canada and Switzerland surpassed Japan as the target for new U.S. direct investment abroad. This article examines the history and practice of cross-investment between the U.S. and Japan. The full story of cross-investment involves a larger tale, that of growing similarities and persistent differences in the government policies, industrial structures, and corporate strategies of the two countries. The growth in similarities represents an increasingly potent weapon in the arsenal of managers and policymakers in the U.S. and Japan.
ISSN:0008-1256
2162-8564
DOI:10.2307/41165237