Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 369: Outward FDI and Home Country Exports: Japan, the United States, and Sweden

Robert E. Lipsey , Eric Ramstetter and Magnus Blomström ()
Additional contact information
Robert E. Lipsey: National Bureau of Economic Research, Postal: 365 Fifth Avenue, 5th floor, New York, N.Y. 10016-4309, U.S.A.
Eric Ramstetter: The International Centre for the Study of East Asian Development, Postal: Kitakyushu, Japan
Magnus Blomström: The European Institute of Japanese Studies, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden

Abstract: Within Japanese multinational firms, parent exports from Japan to a foreign region are positively related to production in that region by affiliates of that parent. A firm that produces a million Yen more in a region also tends to export about a million yen more to that region, given the parent's home production in Japan and the region's size and income level. This relationship is similar to that found for Swedish and U.S. multinationals in parallel studies. A Japanese parent's worldwide exports tend to be larger, relative to its output, the larger the firm's overseas production. In this respect also, Japanese firms resembled U.S. multinationals. A Japanese parent's employment, given the level of its production, tends to be higher, the greater the production abroad by the firm's foreign affiliates. Japanese firms' behavior in this respect is similar to that of Swedish firms, but contrasts with that of U.S. firms. U.S. firms appear to be reducing employment at home, relative to production, by allocating labor-intensive parts of their production to affiliates in developing countries. Swedish firms seem to be allocating the more capital-intensive parts of their production to their foreign affiliates, most of which are in high-wage countries. We conclude that in Japanese firms, supervisory and ancillary employment at home to service foreign operations outweighs any allocation of labor-intensive production to developing countries.

Keywords: Multinational firms; trade

JEL-codes: F14; F23

21 pages, March 22, 2000

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