What Causes Plant Closure within Multi-Plant Firms?

Abstract

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