Table of Contents

Japanese Investment in the World Economy

Japanese Investment in the World Economy

A Study of Strategic Themes in the Internationalisation of Japanese Industry

New Horizons in International Business series

Roger Farrell

This book examines Japanese Foreign Direct Investment (FDI) in the world economy over more than five decades. It provides a unique focus on the internationalisation experience of selected industries, such as forestry, textiles, electronics, motor vehicles, steel and services as well as case studies of individual firms. Japanese Investment in the World Economy is distinctive in that it examines overseas investment by firms in the primary, manufacturing and services sectors over the period in which the Japanese economy became the second largest in the world.

Chapter 3: Strategic Motivations

Roger Farrell

Subjects: asian studies, asian business, asian economics, business and management, asia business, international business, economics and finance, asian economics


OVERVIEW Over the past half century, Japanese firms have established over twenty thousand foreign subsidiaries to facilitate international trade and investment. The strategic motivations of these investors have varied over time and by industry. While some firms sought to secure a stable supply of imported food, raw materials and energy to Japan, others built networks of marketing, distribution and sales affiliates. Other firms relocated manufacturing processes to lower cost locations or by-passed market barriers through investment in assembly operations in the host country. Waves of Japanese foreign direct investment occurred during these five decades, from different industries and towards varying countries, reflecting the evolution of the Japanese economy and the changing pattern of trade between Japan and the rest of the world. An initial focus on exports of primary products, light manufactures, and crude items of the 1950s changed as heavy industrial goods, complex machinery and equipment, and consumer durables became key exports. Gradually overseas production and sales became more essential. By the mid-2000s, clusters of production-oriented affiliates predominated in East Asia, while sales bases were more prevalent in developed economies in North America, Europe and around the world. As the Japanese economy transformed, the pattern of trade and investment shifted. Outward FDI helped Japanese firms to sustain foreign market shares and assisted the restructuring away from older industries, such as textiles. In 1960, textiles accounted for more than 30 per cent of Japanese exports, but this share fell to less than 3 per cent three...

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