Global Competition, Worker Retention, and Immigrant Employment in Manufacturing SMEs

Author Name HASHIMOTO Yuki (Fellow, RIETI)
Creation Date/NO. August 2020 20-E-071
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By focusing on Japanese manufacturing small and medium-sized enterprises (SMEs) that were affected by global competition in the 1990s, we examine the interplay between global competition, immigrant employment, and research and development (R&D) investment in these organizations. To do this, we use firm-level survey data including information on the influence of past globalization, current challenges, and future plans for migrant hiring and R&D investment, showing the process by which firms move toward labor-intensive production as a result of import competition. Our major finding is that manufacturing SMEs facing fierce global competition are more likely to hire immigrant workers and invest less in R&D. In this process, the current poor retention of native young workers plays a substantial role as a channel between past globalization and future immigrant employment. On the other hand, intensifying global competition is directly linked to a decrease in future R&D investment. Neither the shortage of production workers nor the high growth rate in recent years are important determinants of subsequent immigrant hiring or R&D investment.