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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

  • Keiko Ito
  • Ayumu Tanaka

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 effect 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 world-wide 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.

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File URL: http://www.econ.kyoto-u.ac.jp/projectcenter/Paper/e-13-008.pdf
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Paper provided by Graduate School of Economics Project Center, Kyoto University in its series Discussion papers with number e-13-008.

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Length: 47 pages
Date of creation: Mar 2014
Date of revision:
Handle: RePEc:kue:dpaper:e-13-008
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  10. Lipsey, Robert E & Weiss, Merle Yahr, 1984. "Foreign Production and Exports of Individual Firms," The Review of Economics and Statistics, MIT Press, vol. 66(2), pages 304-08, May.
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  12. EDAMURA Kazuma & Laura HERING & INUI Tomohiko & Sandra PONCET, 2011. "The Overseas Subsidiary Activities and Their Impact on the Performance of Japanese Parent Firms," Discussion papers 11069, Research Institute of Economy, Trade and Industry (RIETI).
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  20. repec:cup:cbooks:9781107411289 is not listed on IDEAS
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  25. TANAKA Ayumu, 2012. "The Effects of FDI on Domestic Employment and Workforce Composition," Discussion papers 12069, Research Institute of Economy, Trade and Industry (RIETI).
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