Abstract
Japanese industries have struggled with stagnation after the collapse of bubble economy in the 1990s. Such a financial crisis has led to overseas business expansion of Japanese industries. This study empirically examines Japanese general contractors' overseas operations over the post-bubble period in relation to their financial status. The result shows that general contractors facing financial distress expand overseas business aggressively, when the domestic market shrinks. This result is opposite to conventional wisdom that stronger entities expand their territories of operations, thus "overseas business paradox." However, it can be considered a new scenario of industries' evolution when a country's economy matures.
Highlights
There has been a hot debate of how firms are internationalized in global markets, and there are several theoretical studies to explain the process [1,2,3]
This implies that the measures of overseas business operations increase with a rise in FIS in a concave manner, i.e., the effect of financial status in credit markets on overseas business operations would decrease as financial status worsens
Since the collapse of the bubble economy in the early 1990s, Japan has experienced a longterm economic distress, which has caused Japanese business society to emphasize the importance of overseas business expansion for their survival
Summary
There has been a hot debate of how firms are internationalized in global markets, and there are several theoretical studies to explain the process [1,2,3]. Johanson and Vahlne [1] introduce the Uppsala model to explain how a firm can be internationalized as a process. In Japan, overseas construction operations have become active after the collapse of bubble economy in the early 1990s, overseas operations are still considered difficult due to the uncertainties, complexities, and risks associated with differences in business cultures and practices. These facts have been frequently reported in various reports and articles written in Japanese.
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