This paper investigated the role of corporate headquarters in diversification of products using "the Ministry of Economy, Trade and Industry Basic Survey of Japanese Business Structure and Activities." Following Bernard, Redding and Schott (2010) and Kawakami and Miyagawa (2013), diversified firms are more productive than firms producing single products. Empirical studies of this paper showed the same results in Japanese firms including service sectors after 2005.
Based on the above result, we investigated the relationship between organizational capital and diversification following the framework of the model of Nocke and Yeaple (2014) and adopted the number of employees in managerial segments, research and planning segment and international segments in corporate headquarters offices as a proxy indicator of organizational capital. The Logit model and OLS support the hypothesis for organizational capital from Nocke and Yeaple (2014). But the fixed effect model and dynamic panel model suggested the research and planning segment plays the entrepreneurial role of a headquarters office in stimulating diversification by decreasing business withdrawals. Otherwise, the estimations suggested that organizational efficiency prompted both entry and exit of businesses.