Why Is Multinational Status Important? Evidence from Job Creation and Job Destruction in Japan

Previous studies of job creation and job destruction (JCJD) have found that the gross job reallocation rate greatly exceeded the net job creation rate even in a narrowly defined industry or the same international trade orientation. This paper asks whether multinational enterprises (MNEs) reflect different patterns of JCJD compared to domestic firms. We distinguish two types of MNEs (i.e., Japanese MNEs and foreign-owned firms) and utilize firm-level data in Japan for 1995-2002. We find that the gross job reallocation rate may be equal to the net job creation rate once we control for the entry/exit, industry, worker type, and multinational status. Multinational status is important in explaining the heterogeneity of employment patterns among firms.Multinational Firms, Job Creation and Job Destruction, Japan

Complex Vertical FDI and Firm Heterogeneity: Evidence from East Asia

In this paper we statistically test the validity of the mechanics of complex VFDI in Japanese machinery FDI to East Asia; we do this by estimating a multiple-spatial lag model. From the theoretical point of view, in complex VFDI, the production activity of affiliates in a given country is positively related to that in neighboring countries which have large differences in factor prices with the given country. Our empirical results show that such mechanics of complex VFDI work in Japanese FDI to East Asia, and that they work more strongly in the MNEs with higher productivity. These results have an important implication for the policies of developing countries in attracting FDI.Third-country Effects, Complex VFDI, Spatial Lag Model, East Asia, Foreign Investments

Gains from Fragmentation at the Firm Level: Evidence from Japanese Multinationals in East Asia

The unprecedented development of production networks in East Asia has been investigated, both theoretically and empirically, employing the conceptual framework of fragmentation theory and its extensions. However, the benefits of production fragmentation at the firm level, particularly benefits deriving from different location advantages, have never been directly measured empirically. This paper presents the very first attempt, to the authorsf knowledge, to empirically capture the benefits of fragmentation. Specifically, using Japanese firm-level data, we find that the larger the gap in the capital-labor ratios between fragmenting firmsf home and overseas activities, the more greatly their cost efficiency improves.Firm heterogeneity, multinational enterprises, fragmentation, factor intensity, micro data

The determinants of offshore production by Multinational Corporations (MNCs) : a comparison of Japanese and US MNCs

This study employs confidential affiliate-level panel data to improve measures of foreign affiliate activities of Japanese firms in manufacturing sectors. Combining existing data on U.S. MNCs with the Japanese data, we illustrate the pattern and determinant of their foreign affiliate sales by destination market across countries and industries for the period 1989-2005. Among our results, Japanese and U.S. MNCs are similar in the substantial growth of their foreign affiliate sales and the importance of sales to local markets. However, Japanese MNCs are distinctive from U.S. MNCs in that Japanese affiliate sales in Asia were prominently higher in host markets with lower educational attainment.Japan, United States, International business enterprises, Industrial management, Multinational firm, FDI, U.S., Skill endowment

The Location of Japanese MNCs Affiliates: Agglomeration Spillovers and Firm Heterogeneity

This study examines the determinants of location choices of foreign affiliates by manufacturing Japanese firms, using a new data set that matches parents and their affiliates created over the years 1995-2003. The analysis is based on new economic geography theory and thus focuses on the effect of market and supplier access, as well as production and trade costs. Our interest is twofold. First, we investigate the importance of agglomeration and spillover effects on the firms' decision through the use of proxies relating to the presence of Japanese affiliates in the host countries as well as to that of Japanese multinational firms at home. Overall, our results confirm the economic importance of information sharing and network effects both at home and in the host country beside traditional determinants pertaining to production and transaction costs and access and supply access. Second, we explore whether the effects of key determinants of locational choice vary substantially depending on the characteristics of the investing firm and the plant. We find less productive and smaller parents to be more likely to create an affiliate in China rather than in Western Europe or an OECD country. Moreover less productive firms appear to be more sensitive to distance-related costs and low institutional quality while being more responsive to the presence of Japanese firms and JETRO presence in the host country.

Gains from Fragmentation at the Firm Level: Evidence from Japanese Multinationals in East Asia

The unprecedented development of production networks in East Asia has been investigated, both theoretically and empirically, employing the conceptual framework of fragmentation theory and its extensions. However, the benefits of production fragmentation at the firm level, particularly benefits deriving from different location advantages, have never been directly measured empirically. This paper presents the very first attempt, to the authors' knowledge, to empirically capture the benefits of fragmentation. Specifically, using Japanese firm-level data, we find that the larger the gap in the capital-labor ratios between fragmenting firms' home and overseas activities, the more greatly their cost efficiency improves.Firm heterogeneity; multinational enterprises; fragmentation; factor intensity; micro data.

Location Choice of Multinational Enterprises in China: Comparison between Japan and Taiwan

This paper explores the location choice of MNEs in China, shedding special light on the role of agglomeration of same-nationality firms. In particular, we examine how its role differs according to investors’ productivity. Furthermore, we compare the location choice of Japanese and Taiwanese MNEs in China, because Taiwanese MNEs are expected to experience less uncertainty in investing in China than Japanese MNEs, due to Taiwan’s linguistic and cultural advantages in China. We find that, less productive Japanese firms prefer to locate close to larger same-nationality agglomerations, there are no differences in location according to firms’ productivity in the case of Taiwanese firms.

Complex Vertical FDI and Firm Heterogeneity: Evidence from East Asia

In this paper we statistically test the validity of the mechanics of complex VFDI in Japanesemachinery FDI to East Asia; we do this by estimating a multiple-spatial lag model. From thetheoretical point of view, in complex VFDI, the production activity of affiliates in a given countryis positively related to that in neighboring countries which have large differences in factor priceswith the given country. Our empirical results show that such mechanics of complex VFDI workin Japanese FDI to East Asia, and that they work more strongly in the MNEs with higherproductivity. These results have an important implication for the policies of developing countriesin attracting FDI

What Causes Plant Closure within Multi-Plant Firms?

This paper investigates why plants belonging to multi-plant firms are more likely to exit. Using Japanese plant data linked to firm data we study the process of plant closure among domestic multi-plant firms as well as multi-plant multinationals. As elsewhere in the literature these organisational forms are found to raise the probability of plant exit despite the superior characteristics of the plants they own. We find that the domestic multi-plant ownership effect is attributable to these firms closing the weakest elements of the firm. We reject the idea of multinationals being ‘footloose’ but instead find a residual effect of multinational ownership which reduces the probability of plant death when we control for the process of closure within those firms.Exit, Multinational Firms, Multi-plant firms, International Trade

Pitfalls of location choice analysis : the finished goods producer versus the intermediate goods producer

In literature related to firm location choice, estimation equations are derived from the model of finished goods producers, but producer types are generally not considered. Research presented in this paper shows that the use of equations derived from such models against intermediate goods producers results in several problems