 Does a firm with higher Tobin’s q prefer foreign direct investment to foreign outsourcing?Naoto Jinji, Xingyuan Zhang and Shoji Haruna The North American Journal of Economics and Finance, 2019, vol. 50, issue C Abstract: In this study, we investigate whether firms’ choices of offshoring modes vary according to their characteristics that are reflected in the value of Tobin’s q. When a firm chooses its offshoring mode from foreign outsourcing (FO) and foreign direct investment (FDI), a model developed by Chen, Horstmann, and Markusen (2012, Canadian Journal of Economics) predicts that Tobin’s q is negatively associated with the share of FO in total offshoring activities. Using detailed Japanese firm-level data, we find that Tobin’s q is negatively and significantly correlated with the share of Japanese firms’ engagement in FO in the sum of FO and FDI. With regard to our empirical methodology, we employ fractional regression models, because our dependent variable (i.e., the share of FO) is bounded between zero and one. We also address the issue of endogeneity by using a simple two-step method to control endogenous explanatory variables in the fractional regression models. We show that the above finding is robust. Keywords: Tobin’s q; Foreign direct investment; Foreign outsourcing; Fractional regression model (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:50:y:2019:i:c:s106294081830682x DOI: 10.1016/j.najef.2019.101044 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
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