Competition and Export Performance in Japan

Abstract

The primary objective of this paper is to re-examine the relationship between domestic competition and economic performance in Japan. Specifically, it compares two opposing views: (1) Sakakibara and Porter (2001) who state that the intensity of domestic competition or rivalry is the main determinant of Japanese export success, and; (2) Uriu (1996) who argues that concentrated industries possess more economic alternatives (e.g., flexible labor and capital inputs, diversification, ability to shift excess capacity overseas, etc.) for adjustment and growth than fragmented industries. Using Sakakibara and Porter’s original dataset as well as statistics from the Japan Industrial Productivity database, the local competition-export performance relationship is tested on two subsets (homogeneous good industry vs. heterogeneous good industry). Applying the method of principal components to correct for multicollinearity, I find that the key measure of competition, the concentration ratio, is positively and significantly related with industry exports, contrary to Sakakibara and Porter.