This paper compares the performance of foreign-owned and domestically-owned firms, using micro data on Japanese firms in the manufacturing sector for the period 1994-2000. The overall comparison between foreign-owned and Japanese companies shows that foreign-owned companies enjoyed 5% higher TFP as well as higher earnings and returns on capital. They also displayed a higher capital-labor ratio and higher R&D intensity. Reflecting their higher TFP and labor-saving production patterns, foreign-owned companies showed higher labor productivity and wage rates as well. By estimating Probit models, we found that foreign firms acquire Japanese firms with higher TFP levels and higher profit rates. In contrast, in-in M&As seem to have the characteristics of rescue missions. Small firms with a higher total liability/total asset ratio tend to be chosen as targets of in-in M&As. We also estimated the dynamic effects of M&As on target firms. The results indicate that out-in M&As improve target firms' TFP level and current profit/sales ratio. Compared with in-in M&As, out-in M&As bring a larger and quicker improvement in TFP and the profit rate but no increase in target firms' employment two years after the acquisition.
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Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number
05005.
Length: 45 pages Date of creation: Feb 2005 Date of revision: Handle: RePEc:eti:dpaper:05005
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Kyoji Fukao & Keiko Ito, 2003.
"Foreign Direct Investment and Services Trade: The Case of Japan,"
NBER Chapters,
in: Trade in Services in the Asia Pacific Region, NBER East Asia Seminar on Economics (EASE), Volume 11, pages 429-480
National Bureau of Economic Research, Inc.
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