Winners and Losers in the Asia-Pacific
Edited by Noel Gaston and Ahmed M. Khalid
Chapter 12: The Effects of Overseas Operations on Home Employment of Japanese Multinational Enterprises
Nobuaki Yamashita and Kyoji Fukao* INTRODUCTION The controversy over the possible adverse effects of overseas production by multinational enterprises (MNEs) on home employment first arose in the United States in the late 1960s. It has increasingly gained attention in the policy circles of industrial countries in recent years with the growing importance of the international fragmentation of production (Lipsey, 1995; Harrison and McMillan, 2006). The possible substitution of home employment of MNEs with increased overseas production is known as “exporting jobs” (Kravis and Lipsey, 1988). It became the subject of heated policy debate in Japan under the label of “manufacturing hollowing-out” following a surge of Japanese foreign direct investment (FDI) outflow associated with the spread of production networks to low-cost countries in East Asia from the mid-1980s. In spite of the policy importance, only a few systematic empirical studies are available and they are based on FDI data at the industry level (Fukao, 1995; Fukao and Amano, 1998; Fukao and Yuan, 2001). There is virtually no evidence of how Japanese MNEs adjust home employment in response to changes in the production capacity of foreign affiliates at the firm level. This is certainly an area where studies on Japanese MNEs lag behind those of the US- and Swedish-based MNEs (Lipsey, 1995; Brainard and Riker, 1997a, 1997b; Braconier and Ekholm, 2000; Fors and Kokko, 2000; Desai et al., 2005; Harrison and McMillan, 2006). This chapter explores a panel dataset of operations of Japanese MNEs compiled from two unpublished firm-level surveys, the Basic...
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