Internationalization and Productivity of Manufacturing Firms in the Hokuriku Region

Internationalized firms are more intensively concentrated in three mega-metropolitan regions than in the rest of the population in Japan. Although the firms in the Hokuriku region are relatively more internationalized compared to firms of other non-mega regions, they are significantly smaller in size and lower in productivity than the internationalized firms of the three mega-metropolitan regions. In fact, the productivity of internationalized firms is not significantly higher than that of the non-internationalized firms in the Hokuriku region. Hokuriku firms benefit from the positive externality from the agglomeration of firms in the same industry. Local technological organizations such as public industrial research centers and university technology licensing offices play a certain role. Yet, exporting is a challenge for Hokuriku firms with its local business conditions. Our empirical findings suggest that they tend not to internationalize with a sufficient level of productivity, which would induce firms to internationalize under better business conditions. It is also found that, although not internationalized themselves, Hokuriku firms that are indirectly internationalized through selling products to internationalized firms exhibit higher productivity than those that are neither internationalized directly nor indirectly. Because Hokuriku lacks a major international port within the region but has good connections to all three mega-metropolitan regions through highways and railways, firms may find it more advantageous to be suppliers for exporting firms rather than exporters themselves.