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How Does FDI Affect Productivity at Home?: Evidence from a Plant-Level Analysis

Author

Listed:
  • Kazunobu Hayakawa

    (Institute of Developing Economies)

  • Toshiyuki Matsuura

    (Keio University)

  • Kazuyuki Motohashi

    (The University of Tokyo)

Abstract

This study investigates the effect of foreign direct investments (FDI) on home productivity using plant-level data rather than firm-level data. Our results are consistent with the theoretical predictions. Horizontal FDI (HFDI) does not have a significantly positive effect on home productivity in plants that have the same activities abroad. In contrast, vertical FDI (VFDI) significantly enhances productivity in plants with an input–output relationship with activities relocated abroad. Furthermore, focusing on FDI in East Asia, the productivity improvements at home through VFDI are even greater, which might be caused by significant differences in factor prices between Japan and host countries.

Suggested Citation

  • Kazunobu Hayakawa & Toshiyuki Matsuura & Kazuyuki Motohashi, 2016. "How Does FDI Affect Productivity at Home?: Evidence from a Plant-Level Analysis," Journal of Industry, Competition and Trade, Springer, vol. 16(4), pages 403-422, December.
    • Handle: RePEc:kap:jincot:v:16:y:2016:i:4:d:10.1007_s10842-016-0220-5
    DOI: 10.1007/s10842-016-0220-5
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    3. Natália Barbosa, 2023. "Outward Foreign Direct Investment, Restructuring and Performance Upgrading: Firm-level Evidence from Portugal," Global Business Review, International Management Institute, vol. 24(2), pages 281-294, April.

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    More about this item

    Keywords

    Productivity; FDI; Japan; System GMM;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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