Offshoring and Corporate Headquarters: Evidence from Japanese firm-level data

Author Name TOMIURA Eiichi  (Faculty Fellow, RIETI) /ITO Banri  (Fellow, RIETI) /WAKASUGI Ryuhei  (Research Counselor, RIETI)
Creation Date/NO. June 2010 10-E-032
Research Project Study on Offshore Outsourcing by Japanese Firms
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Offshoring requires firms to have strong corporate headquarters for monitoring and contracting with suppliers. This paper exploits the unique Japanese firm-level data, which categorizes the type of offshore supplier as: own FDI subsidiaries, subsidiaries owned by other Japanese firms, and foreign suppliers. This paper finds that firms outsourcing to foreign or Japanese suppliers tend to allocate significantly more workers to corporate headquarters, compared with firms involved in intra-firm offshoring. The ownership rather than nationality of suppliers is the significant determinant for the size of corporate headquarters in offshoring firms. This finding is robust even after firm-specific effects are controlled for.