As foreign direct investment (FDI) often originates from multinational enterprises (MNEs) with non-core activities and not single-product firms, as MNE theory typically suggests, we hypothesize that such firms are more productive than MNEs without non-core activities as well as non-MNE firms. We test this hypothesis using Kolmogorov-Smirnov stochastic dominance Tests and Japanese firm-level productivity and FDI data for the period 1985-2001. We find that both manufacturing and service multinational firms with non-core foreign investments stochastically dominate firms without non-core activities. We also find cost-complementarities between certain core and non-core FDI activities that span both manufacturing and service affiliates. Copyright 2009 The Authors. Journal compilation 2009 East Asian Economic Association and Blackwell Publishing Ltd..
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Article provided by East Asian Economic Association in its journal Asian Economic Journal.