Abstract
Firms decide to enter international markets, either through exports, or by engaging in foreign direct investments (FDI), based on not only their productivity advantages, but also market and firm-specific factors. This paper empirically investigates what modes of internationalization are chosen by Japanese firms internationalizing in US/European countries and East Asian countries, with a focus on the difference in market-specific factors between regions as well as the productivity heterogeneity between firms. Our analysis, using firm-level data pertaining to 12,000 Japanese organizations, confirms that internationalized firms have higher productivity relative to non-internationalized firms. Further, it reveals that firms engaged in FDI in the U.S. and/or Europe have higher productivity as compared to firms that export to these market destinations. However, this result does not hold for Japanese firms that operate in markets in East Asian markets. The estimated results indicate that the mode of internationalization chosen by a firm is not uniquely determined by its productivity levels, but also reflects market specific-factors in destination countries.
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Notes
- 1.
Countries classified by North and South are listed in Appendix.
- 2.
TFP data used for the analysis in this paper is sourced from Wakasugi et~al. (2008).
- 3.
Aw and Lee (2008) empirically investigate Taiwanese firms that internationalize in two different regions: the U.S. and China. Their findings suggest that the productivity of firms investing in China is higher than an exporter’s productivity, the productivity of firms investing in North America is higher than that for firms investing in China, and the productivity of firms internationalizing to both countries is the highest. But their examination is not exhaustive, and analyzing two very different market types. That is, their analysis is based on only a small number of firms operating in limited industries. Also, their analysis is not clear when it comes to identifying what factors actually affect the relationship between productivity and the mode of internationalization.
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Acknowledgments
We thank Lee Branstetter, Masahisa Fujita, Ronald Jones, Yasuyuki Todo, Eiichi Tomiura, the participants of the 2010 AEA Annual Meeting, held in Atlanta, in January, 2010 and those of the seminars at Kyoto University, Keio University, and RIETI for their valuable comments and suggestions. We also thank Research Institute of Economy, Trade and Industry (RIETI) and the Ministry of Economy, Trade and Industry (METI) in the Government of Japan for granting us access to and use of firm-level data of the government’s statistics “Basic Survey of Japanese Business Structure and Activities”
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Appendix: List of Countries
Appendix: List of Countries
North America | East Asian countries |
Canada | Brunei |
USA | Cambodia |
Europe | China |
Albania | Hong Kong |
Austria | Indonesia |
Belgium | Korea |
Bulgaria | Laos |
CIS countries | Malaysia |
Cyprus | Mongolia |
Czech | Philippines |
Denmark | Taiwan |
Finland | Thailand |
Former Yugoslavia | Vietnam |
France | |
Germany | |
Greece | |
Hungary | |
Iceland | |
Ireland | |
Italy | |
Luxembourg | |
Marta | |
Netherlands | |
Norway | |
Poland | |
Portugal | |
Romania | |
Slovakia | |
Spain | |
Sweden | |
Switzerland | |
Turkey | |
United Kingdom |
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© 2014 Ryuhei Wakasugi
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Wakasugi, R., Tanaka, A. (2014). Productivity and Modes of Internationalization: Evidence from Japanese Firms. In: Wakasugi, R. (eds) Internationalization of Japanese Firms. Springer, Tokyo. https://doi.org/10.1007/978-4-431-54532-3_6
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DOI: https://doi.org/10.1007/978-4-431-54532-3_6
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