With the expansion of cross-national transaction, it becomes increasingly necessary to design industrial policy from a global viewpoint. We investigate this relatively new category of economic policy-international industrial policy. Multinational enterprises (MNEs)have substantially contributed to the recent progress of globalization. From the perspective of international industrial policy (in home countries), MNEs are important both as a measure of policy and an object of patronage. Foreign affiliates of MNEs posses a dual. It is both subject to the laws of the host country and also to the control of the parent MNE which abides by the laws of the home country. This characteristics sometimes leads to conflicts between the home and host countries. The fact that stakeholders of MNEs are usually scattered around the world further complicates the relationship between the interests of MNEs and those of the home country. We study these issues in detail. One of the most important policy objectives of Japanese government now is to help East Asian countries recover from recent currency and financial crises. Japanese MNEs have a substantial share in these economies. By maintaining employment and raising exports, Japanese MNEs can greatly contribute to their host countries. Using micro panel date of Japanese manufacturing affiliates abroad, we study what were the factors that affected affiliates' response to the currency crashes of developing countries in the past. The paper finds that affiliates with higher export ratio in the pre-currency-crash period tend to maintain or increase their employment level after the crash. This implies that export-oriented FDI were more effective than local-market-oriented FDI in helping the host country to resist currency crisis. We also examine the macro-economic factors that affected affiliates' response to currency crashes. We discover that in countries that reduced their openness after the crash, the affiliates also tended to cut their employment.
