Japanese exports, MNC affiliates, and rivalry for export markets

Abstract

The foreign operations of a country's multinational firms (MNCs) are often thought of as competing with the home country's exports, and thus reducing the demand for labor at home. An alternative view is that these operations are part of the competition among countries for foreign markets, including export markets, and that these foreign operations may tend to expand the home country's exports by raising the competitiveness of home country firms in host country markets. The results in this paper suggest that the latter view is correct. The level of Japan's manufactured exports to a country is positively related to employment in foreign manufacturing affiliates of Japanese MNCs in that country. However, Japanese exports to a host country are negatively related to employment in affiliates of US MNCs in that country. Changes in Japanese exports to a market over a period are also positively related to both the initial level of Japanese affiliate employment and to changes in it, but negatively related to the initial level of US affiliate employment. The economic activities of Japanese manufacturing affiliates promote Japanese exports, while the activities of competing MNCs (US affiliates) reduce Japanese exports.