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The Impact of Multinationals' Overseas Expansion on Employment at Suppliers at Home: New evidence from firm-level transaction relationship data for Japan

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  • ITO Keiko
  • TANAKA Ayumu

Abstract

This paper focuses on non-internationalized supplier firms and investigates how the expansion of overseas activities by their main customer firms affects their employment, utilizing a unique dataset that includes information on buyer-supplier transaction relationships for Japanese manufacturing firms for the period 1998-2007. We do not find any negative effects of top buyers' overseas expansion on domestic suppliers' employment. Instead, we find a significant positive effect. Our result implies that, contrary to fears of a potential hollowing out of domestic supporting industries, the expansion of overseas activities of customer firms has a positive impact on suppliers' employment. Expansion of overseas production by downstream firms may increase purchases from upstream firms in Japan, and this would be the case if downstream firms can increase their worldwide sales by expanding overseas production. Therefore, our result suggests that having a transaction relationship with successful downstream multinational firms that expand their global sales through overseas production is important for non-internationalized suppliers in Japan.

Suggested Citation

  • ITO Keiko & TANAKA Ayumu, 2014. "The Impact of Multinationals' Overseas Expansion on Employment at Suppliers at Home: New evidence from firm-level transaction relationship data for Japan," Discussion papers 14011, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:14011
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    Cited by:

    1. Mitsoyo Ando & Fukunari Kimura, 2015. "Globalization and Domestic Operations: Applying the JC/JD Method to Japanese Manufacturing Firms," Asian Economic Papers, MIT Press, vol. 14(2), pages 1-35, Summer.
    2. Endoh, Masahiro, 2022. "The impact of firms’ international trade on domestic suppliers: The case of Japan," Journal of the Japanese and International Economies, Elsevier, vol. 63(C).
    3. INUI Tomohiko & KODAMA Naomi, 2016. "The Effects of Japanese Customer Firms' Overseas Outsourcing on Supplier Firms' Performance," Discussion papers 16106, Research Institute of Economy, Trade and Industry (RIETI).
    4. Goya, Daniel, 2021. "The network effect of Chinese competition on what domestic suppliers produce," Economic Modelling, Elsevier, vol. 102(C).
    5. Daniel Goya, 2019. "Chinese competition and network effects on the extensive margin," Working Papers 2019-01, Escuela de Negocios y Economía, Pontificia Universidad Católica de Valparaíso.
    6. HAYAKAWA Kazunobu & MATSUURA Toshiyuki, 2017. "Overseas Production Expansion and Domestic Transaction Networks," Discussion papers 17085, Research Institute of Economy, Trade and Industry (RIETI).
    7. Masahiro Endoh, 2020. "The Impact of Firms' International Trade on Domestic Suppliers," Keio-IES Discussion Paper Series 2020-016, Institute for Economics Studies, Keio University.
    8. ANDO Mitsuyo & KIMURA Fukunari, 2017. "Job Creation and Destruction at the Levels of Intra-firm Sections, Firms, and Industries in Globalization: The case of Japanese manufacturing firms," Discussion papers 17100, Research Institute of Economy, Trade and Industry (RIETI).

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    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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