Evaluating Japanese Exporters' Performance and Investment Behavior during the 2002-2007 Export Boom

From early 2002 to the end of 2007, the Japanese economy experienced its longest expansion in the post-war era. Such economic growth however, relied heavily on robust export growth. Evaluating whether exporting firms simply enjoyed a temporary export boom or if they also engaged in investments that strengthened their mid to long run competitiveness, is important in inferring the essential meaning of the latest export boom to the Japanese economy. This paper compares performance and various investments by Japanese exporters versus non-exporters during 2002-2005, the earlier half of the export boom. We find that exporters realized significantly higher profitability and more than 5 percentage points higher growth in productivity than non-exporters. However, such an advantage is observed only for large and medium exporters. Small exporters with less than 300 employees may have not benefited significantly from exports due to the fact that they export primarily to Asia and they are not as experienced as their larger counterparts. On the other hand, exporters in general invested more vigorously than non-exporters to enhance headquarter capacity, equipment and facilities, and innovative capabilities, regardless of size. It is thus likely that Japanese exporters more or less strived to enhance their long run competitiveness.