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Globalizing Corporate Activities in East Asia and Impact on Domestic Operations: Further evidence from Japanese manufacturing firms

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  • ANDO Mitsuyo
  • KIMURA Fukunari

Abstract

This paper empirically investigates the pattern of globalizing corporate activities of Japanese manufacturing firms and its impact on their domestic operations and international trade, using 1998-2006 firm level data. More specifically, we compare changes in the domestic operations and international trade of firms expanding operations in East Asia against firms not expanding operations in two periods, 1998-2002 and 2002-2006. For our analysis in the latter period, we also incorporate the information on the firms' globalizing behavior in the former period. In addition, we conduct analyses to compare changes of firms becoming MNEs with firms choosing to remain domestic, and we also compare MNEs that are expanding operations with those not expanding operations. Although the globalization of corporate activities in less developed countries is thought to negatively affect operations and employment at home, our analysis finds that Japanese manufacturing firms expanding operations in East Asia are more likely to increase domestic employment and both the number of domestic affiliates and establishments. Such a tendency is particularly observed in the latter period, when the international division of labor in the region is more active. Furthermore, manufacturing firms that expand operations in East Asia tend to intensify their export and import activities in the region, suggesting the existence of complementary operations. At the individual firm level, the fragmentation of production by Japanese manufacturing firms seems to generate additional jobs and boost operations at home by effectively utilizing the mechanics of production process-wise division of labor in East Asia.

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Bibliographic Info

Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 11034.

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Length: 38 pages
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:eti:dpaper:11034

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References

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  1. Sascha O. Becker & Karolina Ekholm & Robert Jaeckle & Marc-Andreas Muendler, 2005. "Location Choice and Employment Decisions: A Comparison of German and Swedish Multinationals," CESifo Working Paper Series 1374, CESifo Group Munich.
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  3. Ebenstein, Avraham & Harrison, Ann & McMillan, Margaret & Phillips, Shannon, 2011. "Estimating the impact of trade and offshoring on American workers using the current population surveys," Policy Research Working Paper Series 5750, The World Bank.
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  5. Paul A. Samuelson, 2004. "Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 135-146, Summer.
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  7. Stefano Federico & Gaetano Alfredo Minerva, 2008. "Outward FDI and Local Employment Growth in Italy," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 144(2), pages 295-324, July.
  8. Ekholm, Karolina & Hakkala, Katariina, 2006. "The Effect of Offshoring on Labour Demand: Evidence from Sweden," CEPR Discussion Papers 5648, C.E.P.R. Discussion Papers.
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  10. repec:fth:iniesr:490 is not listed on IDEAS
  11. Takatoshi Ito & Andrew K. Rose, 2005. "International Trade in East Asia, NBER-East Asia Seminar on Economics, Volume 14," NBER Books, National Bureau of Economic Research, Inc, number ito_05-1.
  12. Arndt, Sven W. & Kierzkowski, Henryk (ed.), 2001. "Fragmentation: New Production Patterns in the World Economy," OUP Catalogue, Oxford University Press, number 9780199243310, Octomber.
  13. Kimura, Fukunari & Ando, Mitsuyo, 2005. "Two-dimensional fragmentation in East Asia: Conceptual framework and empirics," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 317-348.
  14. Alexander HIJZEN & INUI Tomohiko & TODO Yasuyuki, 2007. "The Effects of Multinational Production on Domestic Performance: Evidence from Japanese Firms," Discussion papers 07006, Research Institute of Economy, Trade and Industry (RIETI).
  15. Ando, Mitsuyo, 2006. "Fragmentation and vertical intra-industry trade in East Asia," The North American Journal of Economics and Finance, Elsevier, vol. 17(3), pages 257-281, December.
  16. Avraham Ebenstein & Ann Harrison & Margaret McMillan & Shannon Phillips, 2009. "Why are American Workers getting Poorer? Estimating the Impact of Trade and Offshoring Using the CPS," NBER Working Papers 15107, National Bureau of Economic Research, Inc.
  17. Fukunari KIMURA, 2006. "International Production and Distribution Networks in East Asia: Eighteen Facts, Mechanics, and Policy Implications," Asian Economic Policy Review, Japan Center for Economic Research, vol. 1(2), pages 326-344.
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