Internationalization of the Japanese Manufacturing Industry and the Structure of the Global Value Chain

As a result of globalization in the world economy, firms with different nationalities are now engaging in the production of goods or services. The potential of a firm's growth driven from participation in the global value chain (GVC) has long been pointed out although figuring out firms' GVC participation is still challenging due to a lack of information of inter-firm trade.

Thus, this paper extracts matched data of firms from the database of Tokyo Shoko Research, LTD. (TSR) including the "TSR firm relationship file" and the "TSR firm group information file," and the "Basic Survey of Japanese Business Structure and Activities" from the Ministry of Economy, Trade and Industry, and classifies the data into "international firms" (those which export and/or have foreign affiliates), "GVC participation firms" (those which directly deliver their goods or services to international firms), and other "GVC non participation firms" to compare the characteristics.

This paper shows that international firms, located at the top of the GVC structure, are the largest and have the best performance in terms of sales, followed by GVC participation firms, implying that participation in GVC and climbing up in the GVC structure enhance the possibility of firms' growth.