The characteristics and performance of Japanese FDI in less developed and developed countries

Abstract

Data on 26,857 Japanese foreign investments in 150 countries and regions over the 1991–1999 period reveal that there are stark differences in the characteristics and performance of Japanese FDI (JFDI) between less developed countries (LDCs) and developed countries (DCs). JFDI in LDCs has been growing more rapidly over the period, and it is concentrated in the Secondary industrial sector, with a lower level of control within a subsidiary, and has been initiated by parent firms with market-seeking and labor-seeking purposes and with relatively weak ownership advantages. In contrast, JFDI in DCs has maintained relatively stable growth over the period, is concentrated in the Tertiary industrial sector, with a higher level of control within a subsidiary, and has been initiated by parent firms with market-seeking and strategic-seeking purposes and with relatively strong ownership advantages. JFDI in LDCs tended to attain a higher financial performance and a lower exit rate, yet with a greater variance, than those in DCs.