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DOES OFFSHORING PAY? FIRM-LEVEL EVIDENCE FROM JAPAN

Authors

  • ALEXANDER HIJZEN,

    1. Hijzen: Economist, OECD and GEP, University of Nottingham, Paris, Cedex 16, France. Phone +33-0-1-4524-9261, Fax +33-0-1-4524-9098, E-mail alexander.hijzen@oecd.org
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  • TOMOHIKO INUI,

    1. Inui: Professor, College of Economics, Nihon University, Chiyoda-ku, Tokyo 101-8360, Japan. Phone + 81-3-3219-3468, Fax + 81-3-3219-3468, E-mail inui@eco.nihon-u.ac.jp
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  • YASUYUKI TODO

    1. Todo: Associate Professor, Graduate School of Frontier Sciences, University of Tokyo, Kashiwa, Chiba 277-8563, Japan. Phone +81-4-7136-4863, Fax +81-7136-4842, E-mail yastodo@k.u-tokyo.ac.jp
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    • *

      This research was conducted as part of a project on industry- and firm-level productivity in Japan undertaken at the Research Institute of Economy, Trade and Industry. The authors would like to thank RIETI for providing us the opportunity of conducting this research and the Ministry of Economy, Trade and Industry for providing us valuable data sets. The authors are also grateful to Kyoji Fukao, Tsutomu Miyagawa, Jungsoo Park, Eiichi Tomiura, Masaru Yoshitomi, and seminar participants at the RIETI-21st Century COE Hi-Stat Program Workshop and the RIETI DP seminar for helpful comments and suggestions and Young Gak Kim, Hyeog Ug Kwon, and Toshiyuki Matsuura for their help in constructing the data set. In addition, the authors are particularly grateful to three anonymous referees for their helpful comments. Inui thanks the Japan Society for the Promotion of Science (Grant-in-Aid for Scientific Research). Hijzen gratefully acknowledges financial support from the Leverhulme Trust (Grant No. F114/BF). The opinions expressed and arguments employed in this article are the sole responsibility of the authors and do not necessarily reflect those of RIETI or any of the institutions the authors belong to.


Abstract

This article explores the impact of offshoring on productivity using firm-level data for the Japanese manufacturing industries during the period 1994–2000. We find that intrafirm offshoring, that is, sourcing of intermediate inputs to foreign affiliates within a particular multinational firm, has generally a positive effect on productivity of the offshoring firm, while arm’s-length offshoring, that is, sourcing to unaffiliated foreign firms, does not have such an effect. In addition, the impact of arm’s-length offshoring is negative for nonmultinationals and nonexporters but nonnegative for multinationals and exporters. These results suggest that the costs of searching foreign firms suitable for offshoring are nonnegligible. (JEL F14, L23)

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