Papers & Books 2003
Outward and Inward Foreign Direct Investment and Japan's Manufacturing Industry:
Empirical Analysis Based on Firm-Level Data
Yukako Murakami (Hitotsubashi University) and Kyoji Fukao (Fellow)
2003/10 (ESRI Discussion Paper Series No. 68)
The full text is written in Japanese.
Abstract
Using firm-level data of the Ministry of Economy, Trade and Industry's Basic Survey of Enterprises, this paper investigates the impact of outward and inward FDI on Japan's manufacturing industry.
Our estimates show that foreign-owned firms in Japan display a TFP level that is on average 10% higher than that of their locally-owned counterparts. We also found that Japanese firms which were acquired by or merged with a foreign firm tend to experience significant improvement in their TFP after the M & A. Moreover, foreign-owned firms showed a faster adjustment of their labor input. These findings highlight the important role that inward FDI can play in raising productivity levels in Japan and contributing to structural change.
With regard to outward FDI, we show that this contributes to an increase in the relative demand for skilled labor within each firm. This provides clear evidence how outward FDI, including the relocation of production, leads to an upgrading of the industrial base in the Japan.