The impact of foreign firms on industrial productivity: evidence from Japan

Kiyoyasu Tanaka

No 533, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: With a newly constructed dataset on foreign firms in Japan for the period 1995-2008 from firm-level surveys, this paper estimates the impact of foreign firms on industrial productivity at the regional level. A Bayesian-model averaging approach is taken to account for model uncertainty resulting from various linkages between foreign firms and domestic industries. The results show that the foreign firms may contribute to industrial efficiency directly through their above-average productivity and indirectly through positive spillovers in intra-industry and local backward linkages. Forward linkages with foreign firms may have a negative impact on industrial productivity. However, these impacts depend on the nationality and entry mode of foreign investors. Aggregating foreign firms may mask their distinctive impacts on productivity.

Keywords: Japan; Foreign Affiliated Firm; Productivity; Econometric Model; Foreign Firm; Industrial Productivity; Bayesian Model Averaging (search for similar items in EconPapers)
JEL-codes: C11 F21 F23 F61 (search for similar items in EconPapers)
Date: 2015-08-01
New Economics Papers: this item is included in nep-cse, nep-eff, nep-ger and nep-int
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Published in IDE Discussion Paper = IDE Discussion Paper, No. 533. 2015-08-01

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