Overseas R&D Activities by Multinational Enterprises: Evidence from Japanese Firm-Level Data

This paper investigates both the determinants and the impact of overseas subsidiaries' R&D activities, using firm-level panel data for Japanese multinational enterprises. We distinguish between overseas innovative and adaptive R&D and find substantial differences between the two types of R&D. The evidence suggests that overseas innovative R&D aims at the exploitation of foreign advanced knowledge, and by doing so, it helps to raise the productivity of the parent firm. In contrast, the primary role of overseas adaptive R&D is to enhance the productivity of overseas subsidiaries through the use of parent firms' knowledge. In addition, we find no complementarity between home and overseas innovative R&D, i.e., no evidence that overseas innovative R&D raises the marginal effect of home R&D on home productivity.overseas R&D activities, multinational enterprises, total factor productivity

The effects of privatization on exports and jobs

The privatization of state-owned enterprises (SOE) in transition economies has often been found to improve employment and productivity of privatized SOEs, despite policymakers’ fears regarding possible job cuts. This positive effect can be enhanced if privatization also promotes firms’ exports. A recent firm-level analysis of China reveals that privatization has indeed a positive effect on export propensity, employment, and productivity in both the short and long term. The effect mostly stems from changes in firms’ attitudes about profits and risks due to competitive pressure

Impacts of Aid-Funded Technical Assistance Programs: Firm-Level Evidence from the Indonesian Foundry Industry

This study examines the effect of Japanese aid-funded technical assistance programs in the Indonesian foundry industry funded, applying difference-in-differences propensity score matching estimation to a unique firm-level dataset. The major finding is that the average effect of the aid programs on the change in the reject ratio is negative and significant, suggesting that these programs help local participant firms improve their technology. However, the effect of the programs is limited to their participants and does not spill over to non-participants. In addition, technical assistance programs provided by the local counterpart of aid after the completion of the aid programs do not seem to improve technology of participants on average.

Quantitative Evaluation of Determinants of Export and FDI: Firm-level evidence from Japan

This paper examines determinants of the export and FDI decision, using firm-level data for Japan. Contributions of this paper are twofold. First, this paper employs a mixed logit model to incorporate unobserved characteristics of firms. Second, special attention is paid to quantitative evaluation of effects of the covariates. We find that the impact of productivity on the export and FDI decision is positive and statistically significant but economically negligible in size, despite the theoretical prediction of recent heterogeneous-firm trade models. The impact of the firm size and information spillovers from experienced neighboring firms in the same industry are also positive but small in size. Quantitatively, the dominant determinants of the export and FDI decision are firms' status on internationalization in the previous year and unobserved firm characteristics. The evidence suggests that there may be some kind of inefficiency in the selection process of exporters and FDI firms.

Does Offshoring Pay? Firm-Level Evidence From Japan

This paper explores the impact of offshoring, or contracting out of business activities to foreign providers, on firm productivity, using Japanese firm-level data for the period 1994-2000. We find that offshoring has generally a positive effect on productivity growth. This effect is robust to controlling for the possible endogeneity of offshoring with respect to unobserved productivity shocks. Our preferred specification suggests that a one percent increase in offshoring intensity raises productivity growth by 0.17 percent. For the average offshoring firm this implies a 1.8 percent increase in annual productivity growth. These results do not appear to depend much on either the level of technological sophistication of a firms' industry or a firms' international orientation. However, we find that the scope for productivity improvements from offshoring depends negatively on the initial level of productivity of the firm.offshoring, international insourcing, domestic sourcing, TFP

Do Multinationals' R&D Activities Stimulate Indigenous Entrepreneurship? Evidence from China's "Silicon Valley"

Using a unique firm-level dataset from China's "Silicon Valley," we investigate how multinational enterprises (MNEs) affect local entrepreneurship and R&D activities upon entry. We find that R&D activities of MNEs in an industry stimulate entry of domestic firms into the same industry and enhance R&D activities of newly entering domestic firms. By contrast, MNEs' production activities or domestic firms' R&D activities do not have such effect. Since MNEs are technologically more advanced than domestic firms, our findings suggest that diffusion of MNEs' advanced knowledge to potential indigenous entrepreneurs through MNEs' R&D stimulates entry of domestic firms.

Overseas R&D Activities and Home Productivity Growth: Evidence from Japanese Firm-Level Data

This paper investigates the impact of overseas subsidiaries' R&D activities on the productivity growth of parent firms using firm-level panel data for Japanese multinational enterprises. We distinguish between overseas R&D for the utilization and acquisition of foreign advanced knowledge, or innovative R&D, and overseas R&D for the adaptation of technologies and products to local conditions, or adaptive R&D. Our major finding is that overseas innovative R&D helps to raise the productivity growth of the parent firm, while overseas adaptive R&D has no such effect. In addition, we examine whether overseas innovative R&D has an indirect effect on home productivity growth by improving the rate of return on home R&D. However, we find no evidence of such an indirect effect, suggesting that overseas innovative R&D does not engender any knowledge transfers from overseas to home R&D units.

Is Foreign Aid a Vanguard of FDI? A Gravity-Equation Approach

This paper investigates whether and how foreign aid facilitates foreign direct investment (FDI) flows into less developed countries. We employ a large data set of source-recipient country pairs and conduct gravity equation-type estimation. Our empirical methodology enables us to distinguish among three effects of aid on FDI: a positive "infrastructure effect," a negative "rent-seeking effect," and a positive "vanguard effect," which is specific to the same source-recipient country pair of aid and FDI. According to our empirical analysis, foreign aid in general does not necessarily have an infrastructure, rent-seeking, or vanguard effect. However, we find robust evidence that foreign aid from Japan has a vanguard effect, while aid from other donor countries reveals no such effect. This vanguard effect seems to be peculiar to the Japanese foreign aid.

What Determines Overseas R&D Activities? The Case of Japanese Multinational Firms

This paper explores what factors determine the nature, extent, and location of Japanese multinationals' R&D activities abroad. Taking advantage of a rich micro-level dataset from the survey on Japanese overseas subsidiaries, the study distinguishes between two types of overseas R&D: innovative and adaptive. We find several differences between the determinants of overseas innovative and adaptive R&D. These differences confirm the view that overseas innovative R&D aims at the exploitation of foreign advanced knowledge, whereas overseas adaptive R&D is mostly influenced by the market size of the host country. Our results provide a convincing and comprehensive explanation of the geographical distribution of overseas R&D by Japanese MNEs.