The Role of Multinational Firms in International Trade: The Case of Japan

This paper examines the role of multinational firms in international trade, using firm-level panel data for Japanese firms between 1994 and 2000. Our results indicate that multinational firms dominate Japanese trade. In 2000, only 13.8 percent of Japanese firms were multinationals but they accounted for 95.1 and 85.4 percent of Japanese exports and imports, respectively. Multinational firms are found to have emerged from being exporters/importers. These results imply that firms do not make the choice of either exports or FDI, unlike the findings of previous studies. Rather, exporters make a decision on whether or not to undertake FDI.