Internationalization of Japanese Firms

Evidence from Firm-level Data

herausgegeben von: Ryuhei Wakasugi

Verlag: Springer Japan

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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Über dieses Buch

This book takes a comprehensive look at Japanese firms engaging in export and foreign direct investment (FDI) and develops new methods and data to investigate the internationalization of firms, which is a focus issue in international trade. Using micro-level data, the book provides an introduction to theoretical and statistical analysis of internationalization modes of Japanese firms with productivity heterogeneity. It makes clear that although the productivity of internationalized Japanese firms is higher on average than that of firms serving only the domestic market, the difference in productivity between exporters and FDI firms is not as obvious in comparison with that of their counterparts in the United States and Europe. Focusing on this point, the book analyzes not only productivity heterogeneity among firms, but also the differences in firm-specific factors other than productivity: industry-specific factors, market-specific factors such as market size and variable and fixed costs for export, and FDI in destination countries. This in-depth investigation reveals how those factors make the modes of Japanese firms’ internationalization different from those in the United States and Europe. Further analysis focuses on the effects of match quality, organizational and institutional factors in the market on firms’ exports, and FDI. As an approach to the current trends in international trade, this book is unique in using detailed firm-level panel data drawn from Japanese government statistics.

Inhaltsverzeichnis

Frontmatter

Introduction and Overview

Abstract

The number of Japanese exporters continued to increase in the decade after 2000. Figure 1, using data from the Basic Survey of Japanese Business Structure and Activities which covers Japanese manufacturing firms with over 50 employees and more than 30 million yen of capital stock, shows that the number of exporters in the manufacturing sector increased from 3,762 firms in 2000 to 4,518 firms in 2010. Figure 1 also depicts the type of exporters that increased, with firms categorized into deciles by export ratio, which is defined as the ratio of their exports to total sales. This figure reveals an increase of exporters classified in the export ratio categories of 10 % or more. This trend is similar to even non-manufacturing firms, including wholesalers, retailers, and firms in the service sectors.

Ryuhei Wakasugi

Features of Japanese Internationalized Firms: Findings Based on Firm-Level Data

Abstract

By using firm-level data on the Japanese manufacturing industry, we examine and compare the characteristics of internationalized Japanese firms, namely firms that engage in exports and/or foreign direct investment (FDI), with those from selected European countries. We find that the productivity of internationalized firms is higher than that of domestic firms, thus confirming the findings of previous studies on Japan and other countries. In addition, we show that the productivity differences between domestic firms, exporters, and FDI firms are substantially smaller in Japan than they are in European countries. This finding suggests that productivity differences alone cannot determine the export or FDI behavior of Japanese firms.

Ryuhei Wakasugi, Banri Ito, Toshiyuki Matsuura, Hitoshi Sato, Ayumu Tanaka, Yasuyuki Todo

Heterogeneity and the Structure of Export and FDI: A Cross-Industry Analysis of Japanese Manufacturing

Abstract

The fraction of exporters and multinational enterprises (MNEs) varies substantially across industries. We extend the firm heterogeneity model presented by Helpman et al. (Am Econ Rev 94(1):300–316, 2004) to derive testable predictions about the prevalence of these internationalized modes. The model indicates that intra-industry firm heterogeneity and R&D intensity play large roles in inter-industry variation of the fraction of internationalized firms. We investigate whether these factors affect the structure of export and foreign direct investment (FDI) using Japanese industry-level data. We obtain results that are consistent with the model. First, industries with larger productivity dispersion have a larger fraction of MNEs and a larger fraction of the sum of exporters and MNEs. Second, MNEs are heavily concentrated in R&D-intensive industries.

Ayumu Tanaka

The Role of Non-productivity Factors in the Internationalization of Firms

Abstract

Using firm-level data for Japan, this chapter examines the determinants of export and foreign direct investment (FDI) decisions. We contribute to the literature by employing a mixed logit model to incorporate any unobserved firm heterogeneity and by paying special attention to the quantitative significance of the determinants. We find that although the effect of productivity on export and FDI decisions is positive and statistically significant, this effect is economically negligible. The quantitatively dominant determinants of the export and FDI decision are instead the prior status of firms in terms of internationalization and unobserved firm characteristics. This finding suggests that foreign market entry costs, which vary substantially in size across firms, play an important role in the export and FDI decision. Using a unique dataset for small and medium enterprises, we further show that such non-productivity factors of firm internationalization that are unobserved in standard firm-level data include the risk and time preferences and international experience of decision makers.

Yasuyuki Todo

Entry into Foreign Markets Through Foreign Direct Investment

Abstract

This chapter investigates patterns of Japanese foreign direct investments (FDIs) using firm-level data on Japanese multinational enterprise (MNE) foreign subsidiaries. First, we present an overview of Japanese FDI and find stylized facts. For example, subsidiary sales and the number of investing countries are related to the scale of operation in Japan. Many foreign subsidiaries are engaged in export to neighboring countries and are categorized as export-platform-type FDI. Second, we present a model that extends the framework of Helpman et al. (Am Econ Rev 94(1):300–316, 2004) and accounts for overseas subsidiaries supplying goods to neighboring countries. Third, based on this model, we estimate the gravity model of MNE foreign subsidiary sales and find that the impact of the subsidiary’s distance from the host country on the number of subsidiaries (extensive margin) is very large compared to previous studies that used data from U.S. MNEs. In addition, the estimation models that use market potential instead of host country GDP have a higher explanatory power, suggesting that market potential plays an important role in explaining FDI patterns. In contrast, although the effect of market potential on average subsidiary sales (intensive margin) is significantly positive, its effect on the number of subsidiaries is negative and insignificant.

Toshiyuki Matsuura, Hitoshi Sato

Productivity and Modes of Internationalization: Evidence from Japanese Firms

Abstract

Firms decide to enter international markets, either through exports, or by engaging in foreign direct investments (FDI), based on not only their productivity advantages, but also market and firm-specific factors. This paper empirically investigates what modes of internationalization are chosen by Japanese firms internationalizing in US/European countries and East Asian countries, with a focus on the difference in market-specific factors between regions as well as the productivity heterogeneity between firms. Our analysis, using firm-level data pertaining to 12,000 Japanese organizations, confirms that internationalized firms have higher productivity relative to non-internationalized firms. Further, it reveals that firms engaged in FDI in the U.S. and/or Europe have higher productivity as compared to firms that export to these market destinations. However, this result does not hold for Japanese firms that operate in markets in East Asian markets. The estimated results indicate that the mode of internationalization chosen by a firm is not uniquely determined by its productivity levels, but also reflects market specific-factors in destination countries.

Ryuhei Wakasugi, Ayumu Tanaka

Foreign Direct Investment with Matching Frictions

Abstract

Firm-level data often show different modes of market access by firms with same productivity levels, which presents a knife-edge scenario in the standard Melitz-type firm heterogeneity model. Further, the standard Melitz-type model fails to explain another empirical regularity: the foreign affiliates’ sales relative to those generated by parent firms in their home market decrease with distance between the host and home countries. This chapter examines the foreign direct investment (FDI) decisions of individual firms with a simple framework, where firms and managers have to make matches for production. We find that the predicted distributions of FDI firms are much more akin to real data than those suggested by the basic firm heterogeneity model; namely, there exists a range of firm productivity in which more productive firms may export, whereas less productive firms may undertake FDI. Such a range of firm productivity becomes wider when either matching frictions increase or trade costs decline. Furthermore, the model predicts that the FDI sales relative to those generated by FDI firms in their home market decrease in the degree of matching frictions, which sheds some light on the empirical finding about the FDI sales relative to home sales by multinationals.

Hitoshi Sato

Intra-Firm Trade and Contract Completeness: Evidence from Japanese Foreign-Affiliated Firms

Abstract

The issue on growth and its variations of the intra-firm trade of intermediate inputs are of great interest in international economics. Recently, many economists have stepped forward to explain this issue. However, traditional trade theory cannot explain the choice between intra-firm trade with vertical integration and international outsourcing. Thus, researchers are motivated to incorporate the concepts from industrial organization and contract theory to explain the organizational structure of firms. Using micro data at the affiliate-firm level, this chapter examines the determinants of intra-firm trade by shedding light not only on factor prices and trade costs but also on organizational structure in terms of the ownership of overseas plants and the control over intermediate inputs for further processing. Since organizational structure and intra-firm trade are jointly determined, we adopt instrumental variable (IV) regressions into our analysis and treat the choice of purchasing managers as an endogenous variable. The results suggest that the control over input decisions critically affects the intra-firm trade of intermediate inputs.

Toshiyuki Matsuura, Banri Ito

Backmatter

Titel: Internationalization of Japanese Firms
herausgegeben von: Ryuhei Wakasugi
Verlag: Springer Japan
Electronic ISBN: 978-4-431-54532-3
Print ISBN: 978-4-431-54531-6
DOI: https://doi.org/10.1007/978-4-431-54532-3