Impact of Machinery-manufacturing Industry on Globalization and Productivity

Amid the collapse of Japan's bubble economy and the intensification of international competition in the 1990s, Japanese companies made steady progress in launching operations overseas. It is thought that companies engaging in global activity increase their productivity at company level through shifting to higher-value-added fields domestically as well as shifting their production activities overseas. Progressive globalization seems to have a considerable impact on productivity in the economy as a whole through the redistribution of production resources among companies.



This paper focuses on the machinery industry, in which there is a remarkably high degree of globalization of corporate activity, and it analyzes the impact of overseas production on productivity. As data sets we used establishment-level data in the Census of Manufacturers in 1995, 2000, and 2003, together with firm-level information in the Basic Survey of Japanese Business Structure and Activities and the Basic Survey of Overseas Business Activities. As a result of the productivity analysis at establishment level it was clear that both domestic companies and those engaged in overseas activities have been shifting their production activities into fields of high productivity. In the case of companies operating overseas, however, the impact on raising productivity from within establishments was substantial, while in the case of domestic companies there is a considerable impact on productivity from the opening and closing of establishments. In this way the globalization of business activity encourages the shift of production resources into business areas where productivity is high, and thus results in an increase in productivity. However, this also suggests that the nature of this differs between companies operating overseas and those operating domestically.