The Effects of Multinational Production on Domestic Performance: Evidence from Japanese Firms

Author Name Alexander HIJZEN  (OECD and GEP, University of Nottingham) /INUI Tomohiko  (College of Economics, Nihon University) /TODO Yasuyuki  (School of International Politics, Economics and Business, Aoyama Gakuin University)
Creation Date/NO. March 2007 07-E-006
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In the present paper we investigate the causal effect of becoming a multinational on home performance for a large panel of Japanese firms for the period 1995-2002. We adopt matching techniques in combination with a difference-in-difference estimator to evaluate the causal effect of establishing a foreign affiliate on productivity, output and employment. We find that Japanese outward FDI tends to strengthen the economic activities of Japanese firms in Japan in terms of both output and employment. This finding is in line with the stylized fact in the literature that FDI and exports are complements. However, we do not find a significant positive effect on productivity.