Characteristics of Firms and Direct Investment Abroad : An Empirical Analysis of Japan's Electric Machinery. Industry. Based on. Corporate Date.

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The overseas production activities of Japanese companies have expanded rapidly since the 1980s, and there are concerns that the resultant decrease in exports from Japan and increase of reverse-imports to Japan have had a serious impact domestically on production activities and employment, i.e.that Japan's domestic production base is being "hollowed out." This paper presents a theoretical model of overseas subsidiaries engaged in electric machinery production and their parent companies in Japan and then uses panel data to analyze the impact of overseas production on the parent companies' exports and reverse-imports. Studies in Japan heretofore have had the drawback of including investment in overseas sales subsidiaries within the data for direct investment, and to eliminate this problem, this paper only examines overseas production subsidiaries, subtracting inter-region import from sales to yield net production figures. Analysis of these figures show that companies which increased the production activities of their overseas subsidiaries in Asia had greater levels of export to Asia, subtracting reverse-import to arrive at net export, however, reveals a negative effect. In contrast, companies which increased the production activities of their overseas subsidiaries in North America had lower levels of export to North America. These results show that at least the corporate level, the expansion of overseas production activities very likely accompany the reduction of production activities at the parent company.