Productivity of Offshore Affiliates and Distance from Headquarters: Evidence from Affiliate-Level Data of Japanese Multinationals

Author Name LU Yi (Tsinghua University) / TOMIURA Eiichi (Faculty Fellow, RIETI) / ZHU Lianming (Osaka University)
Creation Date/NO. May 2020 20-E-047
Research Project Empirical Analysis of Corporate Global Activities in the Digital Economy
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Multinational enterprises (MNEs) have affiliates often with different distances from headquarters (HQ). This paper examines the relationship between distance and productivity of offshore affiliates based on affiliate-level data of Japanese MNEs. Affiliates located farther from the HQ home country tend to be significantly more productive. This finding is robust even if we control for host country factors, industry effects, affiliate attributes, and parent MNE effects, including technology transfers from HQ.