U.S. and Japanese foreign direct investment in East Asia: A comparative analysis

East Asia has led the world in economic growth and export expansion in recent decades. The phenomenal rate of economic growth among the so-called "four little tigers"-Hong Kong, Singapore, South Korea, and Taiwan-enabled them to achieve newly industrializing country (NIC) status in the 1980s, followed by Indonesia, Malaysia, and Thailand. Earlier studies explained the development from the government-led development paradigm, or the so-called the statist approach. Scholars also argue that foreign direct investment (FDI) played an important role in the economic development, thanks to technology transfers. Kojima and Ozawa and later Kohama, however, argue that Japanese FDI help East Asian economies while U.S. FDI do not because Japanese technology transfer practices are appropriate for East Asian countries but not the United States'. Thus, we revisit the issue of East Asian economic development and test the economic effects of FDI from the United States and Japan. Using a Barro-type growth model, we test the effects of FDI from the United States and Japan on economic growth in East Asian NICs. We find that FDI from both the United States and Japan helped economic growth in the "four little tigers," but not in Indonesia, Malaysia, and Thailand.