Japanese direct foreign investment and the Asian financial crisis (original) (raw)
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The Extent and History of Foreign Direct Investment in Japan
SSRN Electronic Journal, 2000
The past few decades have seen a significant rise in foreign direct investment (FDI) worldwide. While Japanese companies have actively contributed to this trend, FDI in Japan continues to be much lower than in other countries. This paper explores the history of both outward and inward FDI in Japan, looking in particular at the reasons for the low levels of inward FDI. New calculations for this paper -based on data from the Establishment and Enterprise Census -show that foreign firms' role in the Japanese economy may be substantially larger than the most frequently cited published statistics suggest. In some industries (motor vehicles and electrical machinery in particular), inward FDI penetration, as measured by the share of employment accounted for by foreign affiliates, in Japan in fact is on par with the United States. However, a large number of "sanctuaries" with almost no foreign involvement remain, so that FDI penetration overall is still very low. While to some extent, this can be explained by Japan's relatively isolated geographic location, historical factors play an important role. Throughout the centuries and until quite recently, Japan's rulers have viewed foreign involvement in the economy as a threat and consequently erected various barriers to FDI, which are discussed in detail.
Japanese Foreign Direct Investment in Mexico and the Impact of the Global Crisis
Japanese Foreign Direct Investment in Mexico and the Impact of the Global Crisis , 2012
This paper aims to analyze the evolution and main characteristics of Japanese Foreign Direct Investment in Mexico, since Japan has been the main source of investment in Mexico coming from Asia. Attracted by Mexico´s liberalization trade policy since the eighties, Japanese subsidiaries already established in the United States transferred some of their production activities into Mexico, contributing to the leading automotive and electronic exporting sectors. Both the North American Free Trade Agreement and the Japan-Mexico Economic Partnership Agreement have incentivized the location of Japanese plants in Mexico. Given the concentration of Japanese Foreign Direct Investment in the manufacturing exporting sector, it is playing a role in the formation of production networks with connections not only to North America but to Asian countries as well.
The Dynamics of Overseas Business Activities by Multinational Companies from Japan
Annals of the University of Petrosani Economics, 2011
At the beginning of the 21 st century, the new economic order settled at international level is based on the intensification of the activities of multinational companies (MNC) on global markets. Japan-the third world economy in 2010-registers outstanding economic results due to its strong connection to the current of the globalization of international affairs. The issue of understanding the key role of Japanese MNCs in international business received a great deal of attention in recent years. We found that Japanese firms expanded their overseas production from 3.1% in 1986 to 16.3% in 2005 and 17% in 2009. Although MNCs are a minority in terms of the number of firms, they nevertheless dominate the Japanese trade. In recent years, Japanese firms have become more active in developing overseas activities by establishing local subsidiaries and acquiring local companies. Therefore, cross-border Mergers & Acquisitions (M&A) appeared to be a very useful tool through which Japanese MNCs expanded their tentacles worldwide. Despite the devastating effects of the great East Japan Earthquake, statistical data released by UNCTAD show that Japan will again be, on the long run, a leading investor for outward FDI. Therefore, Japanese MNCs will continue to play a key role within international business environment. KEY WORDS: multinational companies; foreign direct investments (FDI); oversea operation or oversea production; cross-border mergers and acquisitions (M&A); the great East Japan Earthquake.
Japanese Direct Investment in China and Other Asian Countries
2002
This paper examines the recent trends, characteristics and determinants of Japanese direct investment in China. To study these issues, we first use qualitative and survey data to compare Japanese direct investment in China with similar investment in other Asian countries. We found that within Asia, China is the largest recipient of Japanese direct investment, with Hong Kong and Thailand coming in second and third. 76.5% of Japanese direct investment in China is in manufacturing. Such concentration in manufacturing is typical for Japanese investment in developing Asia, but rather unusual compared with Japanese investment in other developed countries. Almost one-third of Japanese investment in China is in electrical machinery. 40% of Japanese firms invest in China for cost reasons, while 21% say that they invest in China to expand market shares in China. In 1999, Japanese affiliates in China procure 47% of their inputs from China and sold 47% of the goods locally in China. We also examine econometrically the determinant of Japanese direct investment in various regions of China and compare these locational factors for direct investment from Hong Kong, the largest foreign investor in China. We found that Hong Kong companies place a stronger emphasis on labor costs and a smaller emphasis on labor quality compared to Japanese multinationals. In addition, Japanese firms prefer Economic and Technology Development Zones (ETDZs) while Hong Kong firms are attracted to Special Economic Zones (SEZs).
Characteristics and performance of Japanese foreign direct investment in Europe
European Management Journal, 1995
This article by Detlev Nitsch, Paul Beamish and Shige Makino provides an illuminating presentation of the characteristics and performance of 118 Japanese subsidiaries in Europe. The study is one of the few that contains performance data at the subsidiary level. Subsidiary performance is limited to the initial mode of entry, industry and country of entry, subsidiary size, and reasons for entering. Japanese investment in Europe grew significantly in the late 1980s, but was heavily concentrated in a few industries. Entry mode preferences have also shifted, away from greenfield start-ups to more use of joint ventures. Conclusions are of interest to European and non-European corporate managers, and public policy-makers. The European Union attracts the attention of managers in other parts of the world both as a source of serious global competitors, and as a compelling market for a multinational firm's products. This artide examines the latter point, looking at Europe as a manufacturing site from the point of view of Japanese manufacturing corporations with subsidiaries in the region. Europe has often been depicted in the popular and business press as a homogeneous entity, especially in the late 1980s and early 1990s as worldwide excitement about '1992' reached a fever pitch. Managers were exhorted to pay attention to 'EC '92', or to 'go to Europe', without regard for where their business would be located once behind the 'EC barrier'. Readers of this Journal are, of course, well aware that cultural, political, regulatory, and other differences exist between Western European countries. Indeed, many writers have described these differences, in this and other journals.
On the behavior of global multinational enterprises during the 1997 Asian financial crisis
In this paper, we examine the impact that the 1997 financial crisis had on the number and value of investments made by global multinational enterprises (MNEs) in Korea. Prior to the onset of the crisis, our results indicate that the real value of investments made by MNEs were primarily motivated by the sharp drop in value of the host economy’s currency and imports. MNE decisions regarding the number of FDI differed substantially by country. US and Japanese MNE decisions were largely motivated by labor strike and import considerations, while UK and French MNEs were guided primarily by exchange rate and institutional factors. After the onset of the crisis, MNEs from different source countries made very different FDI-related decisions. Japanese MNEs took a very conservative approach to Korean FDI, both in terms of the number and value of projects. US, UK and French MNEs adopted a “stop and go” approach to FDI, particularly in terms of the real value of projects. MNEs from these three c...
Europe since the beginning of the region's transition. The use of rm level data on Japanese foreign direct investment (FDI) in the region allows us to focus on the industry, location and timing of af liate establishment at a level of detail previously unexamined. This enables us to compare Japanese investment with overall regional inward investment as well as investigate country specialisation patterns within the region. We also characterise the type of investing parent, and determine how investments in CEE t into the European-wide investment patterns for these rms. Finally, we investigate the entry mode choices of investing rms, nding a shift from minority-owned joint ventures and limited participation in the region in favour of wholly-owned subsidiaries and larger involvement in the region.
The characteristics and performance of Japanese FDI in less developed and developed countries
Journal of World Business, 2004
Data on 26,857 Japanese foreign investments in 150 countries and regions over the 1991-1999 period reveal that there are stark differences in the characteristics and performance of Japanese FDI (JFDI) between less developed countries (LDCs) and developed countries (DCs). JFDI in LDCs has been growing more rapidly over the period, and it is concentrated in the Secondary industrial sector, with a lower level of control within a subsidiary, and has been initiated by parent firms with market-seeking and labor-seeking purposes and with relatively weak ownership advantages. In contrast, JFDI in DCs has maintained relatively stable growth over the period, is concentrated in the Tertiary industrial sector, with a higher level of control within a subsidiary, and has been initiated by parent firms with market-seeking and strategic-seeking purposes and with relatively strong ownership advantages. JFDI in LDCs tended to attain a higher financial performance and a lower exit rate, yet with a greater variance, than those in DCs.
FDI and REGIONAL INTEGRATION: The Role of Japanese Multinational Corporations
In the early postwar era, Japanese FDI was relatively modest and limited mainly to the extractive and labor-intensive industries. During the five year period from the 1985 Plaza Accord to 1990, however, the amount and cases of Japanese FDI nearly doubles the totals of the previous 35 years, covering a broader range of industries. Since much has been written about Japanese production networks before 1997, my paper is a simple exploratory study on the changes in Japanese international production networks after the Asian Crisis and the implications this may have for regional integration. It is still too early to distinguish between recovery measures and broader organization changes. Therefore, I provide three before-and-after snapshots of Japanese foreign direct investments (FDI) in order to take a first cut at this issue. First, I examine the recent trends in and distribution of Japanese FDI and the resulting horizontal division of labor that has emerged among the Asia-Pacific economi...
FDI in the Restructuring of the Japanese Economy
2000
This paper examines how inward and outward foreign direct investment (FDI) have influenced the restructuring of the Japanese economy and can be expected to continue to do so in the future. We find that outward investment has helped Japanese firms to sustain foreign market shares and contributed to the restructuring of the Japanese economy away from older industries. By shifting from exporting to affiliate production, there has been a geographical reallocation of the activities of Japanese firms, particularly those of multinational manufacturing firms. However, Japanese outward FDI is still not very large relative to the Japanese economy, despite the rapid growth since the mid-1980s, and there is still scope for significant increase when compared with the levels of most other OECD countries. Inward FDI will presumably have an even stronger impact on the restructuring of the Japanese economy. Although the stock of inward foreign direct investment is still very small, there are important changes under way. Deregulation has opened up much of the industrial and service sectors to foreign multinationals.