Japanese Multinational Enterprises Research Articles

Japanese Multinational Enterprises in China: Successful Adaptation of Marketing Strategies

This paper examines three case studies of Japanese multinational enterprises (MNEs) in China. They are from different sectors – retailing (Ito-Yokado), consumer goods (Shiseido) and automobiles (Toyota) – and all have had to adapt their business models to Chinese conditions. The paper examines the direction, extent and nature of adaptation of the Japanese firms' business models in China and seeks to explore the changes in terms of conventional ‘Japanese’ international marketing behaviour. It finds that Japanese international marketing has evolved. While some aspects of success (organisational abilities, long-term orientation, aggressive growth strategies, ownership, R&D) have been diffused from developed to emerging markets, others (identification of customer needs and wants, information processing capabilities) have been extended. Segmentation and positioning are fine-tuned and are significantly different from Japanese strategies in developed markets. However, it would be a mistake to characterise a ‘Japanese’ strategy for the Chinese market, as no single approach predominates. Even within our sample of three case studies, strategies vary between the three firms and within each firm they vary over time. In all three cases, the Japanese MNEs are very conscious of consumer needs in China and the dynamics of these needs. A flexibility of approach is evident from Japanese MNEs in China. Overall, we conclude that Japanese MNEs are not ‘Western’ or ‘Japanese’ in their approach to the Chinese market, but are flexible, realistic and pragmatic.

The rise of the Japanese multinational enterprise: then and now

Japanese multinational enterprises (MNEs) have evolved since the1980s when they first came to prominence. The rise and degree of their success are not uniform stories and Japanese MNEs vary greatly by size, sector and administrative heritage. Their degree of integration with world capital markets is low and management styles and innovation systems are idiosyncratic. Pressures on Japanese MNEs to increase flexibility and openness have resulted in unusual hybrid structures.

Competitiveness, localization and Japanese companies in China: realities and alternate approaches

Japanese multinational enterprises have traditionally been criticized for lagging behind Western companies in the localization of management practices, especially at managerial level. This has been ascribed to Japanese MNEs initiating offshore activities later than Western counterparts. Such reasoning cannot be applied to the case of China, where the ‘starting line’ was almost the same for all foreign firms. Drawing on case study evidence of Japanese firms in China, this study offers an alternate explanation for the lag in localization in respect of production methods and work style, and identifies a number of possible solutions for Japanese MNEs.

OVERSEAS R&D ACTIVITIES AND HOME PRODUCTIVITY GROWTH: EVIDENCE FROM JAPANESE FIRM‐LEVEL DATA*

This paper investigates the impact of overseas subsidiaries' R&D activities on the productivity growth of parent firms using firm‐level data for Japanese multinational enterprises. Based on survey responses, we classify each overseas subsidiary's R&D as either ‘innovative R&D,’ which we hypothesize is likely to lead to the acquisition of foreign knowledge, or ‘adaptive R&D,’ which is more likely to lead to adaptation to local conditions. We find that overseas innovative R&D raises the parent firm's productivity growth, while adaptive R&D has no such effect. In addition, overseas innovative R&D does not improve the rate of return on home R&D.

R&D intensity for innovative and adaptive purposes in overseas subsidiaries: Evidence from Japanese multinational enterprises

This paper investigates the causes of R&D activities of overseas subsidiaries using firm-level panel data for Japanese multinationals. We distinguish between overseas innovative R&D (basic and applied research) and adaptive R&D (development and design) and examine how the intensity of each type of R&D is determined, using Amemiya Generalized Least Squares estimation. Our findings suggest that overseas innovative R&D aims at the exploitation of foreign knowledge, whereas adaptive R&D has no such aim. In addition, the size of the host country’s market positively affects both types, whereas geographic distance between the host and the home country has a negative impact. Finally, the parent firm’s knowledge is found to increase the size of overseas adaptive R&D but not innovative R&D. Based on a theoretical model, we interpret this evidence as showing that knowledge of the parent firm is not fully utilized in innovative R&D of its subsidiary.

The regional nature of Japanese multinational business

In the world's largest 500 firms, there are 64 Japanese multinational enterprises (MNEs) with data on regional sales, but only three operate globally; whereas 57 of them average over 80% of their sales and foreign assets in their home region. Why is there such a strong intra-regional dimension to their activities? Using empirical data and a new framework for analysing both downstream (sales) assets and upstream (production) assets we analyse why most large Japanese firms appear to have firm-specific advantages (FSAs) that are based in their home region. A structural contingency approach is applied to two case studies to explain how home-region-bound FSAs constrained the ability of Japanese MNEs to implement internationalisation strategies.

A comparative analysis of the internationalization of Chinese and Japanese firms

This paper integrates institution-, industry-, and resource-based views of internationalization and demonstrates that industrial characteristics, firm resources, and institutional factors can significantly explain the differences and similarities of international expansion of Chinese and Japanese multinational enterprises (MNEs). In particular, this paper maps the growth of Chinese MNEs since economic reforms in 1978 and that of Japanese MNEs after World War II. We illustrate the similarities and differences between Chinese and Japanese MNEs with two case studies: foreign direct investment (FDI) of Haier and Matsushita. We suggest that how firms internationalize, in addition to being influenced by industry- and resource-based considerations, is inherently shaped by the domestic and international institutional frameworks governing these endeavors.

Japanese Multinationals in Europe: A Comparison of the Automobile and Pharmaceutical Industries

This ambitious work, centering on data about individual firms, examines an area of research on multinational companies that has until now received little attention. First, it performs a full-scale analysis of Japanese corporate operations in Europe, which have a relatively shorter history, and about which far less research has been accumulated, than for American multinational enterprises (AMNEs) in Europe or Japanese multinational enterprises (JMNEs) in the US and Asia. Second, while previous studies of multinationals have focused on manufacturing operations, this study gives virtually the same weight to sales operations (including logistics), R&D locations and European regional headquarters as it does to manufacturing locations. Third, while studies of JMNEs have most often dealt with the internationally competitive automotive and electronics industries, this work takes as its subject the pharmaceutical industry, which got a slow start in international competitiveness, examined in comparison to the automotive industry. Fourth, the author makes location strategies, method of market entry (by merger, acquisition or greenfield investment) and establishment of regional headquarters amid European unification—topics that until now had been studied separately—the three pillars of his study, pursuing his research through an inquiry of their mutual interrelationship.

A new tale of two cities: Japanese FDIs in Shanghai and Beijing, 1979–2003

Transitional economies can be characterized by considerable sub-national variation in economic and political characteristics. We investigate how this variance influences the timing of entry, entry mode, industrial traits, and survival rates for Japanese foreign direct investments (FDIs) made in China's two major metropolises—Shanghai, the economic center, and Beijing, the political capital. Using a sample of 1610 subsidiaries of Japanese firms established during the 1979–2003 period, our empirical results show that Japanese multinational enterprises (MNEs) tended to choose an economic-oriented rather than a political-oriented city as their investment location, with the consequence being higher survival likelihoods in Shanghai than in Beijing. This location choice helped Japanese firms avoid policy uncertainty and political hazards in China's transition economy. Our findings highlight the point that fundamental features of institutional environments at sub-national levels should be analyzed when looking at investment strategy and performance in transitional economies.

Beyond social capital: A critical approach

Introduction Sierk Horn and Adam R. Cross 1. The Rise of the Japanese Multinational Enterprise: Then and Now Peter J. Buckley Part 1: Japanese Investment Strategies for China 2. Competition Strategies of Japanese Manufacturing Firms in China mid-1990s and 2000s Tetsuo Abo 3. Spatial Determinants and Characteristics of Japanese FDI in China John Cassidy 4. The Evolution of Japanese Investment in China: From Toys to Textiles to BPO Andrew Delios 5. Cross-Border Development of Equipment Manufacturing Industries in Asia Markus Thinnes Part 2: Competitive and Localisation Strategies of Japanese MNEs 6. Cooperation or Competition in the Electronics Industry in China - Segmentation and Concentration Strategy with regard to R&D and Human Resources Development Sung-Jo Park 7. Pre-clusterization in Emerging Markets: The Toyota Group's Entry Process in China Faith Hatani 8. The Competitive Edge and Localisation Dilemma faced by Japanese Companies in China Hiroshi Itagaki Part 3: Japanese Management Practices in China 9. Multidomestic Industries from Japan and the Transfer of Organisational Practices to Chinese Subsidiaries Jos Gamble 10. Leapfrogging the Wheel of Retail: Japanese Retailing Strategies in China Sierk Horn and Katrin Horn 11. A Comparative Study of Product Development and Marketing in China and Japan Tomoo Marukawa Part 4: Japanese MNEs and Regional Integration in East and SE Asia 12. Intermodal Logistics Developments in North-East Asia - Challenges and Directions Burkhard Horn and Sam Dzever 13. Global Operations Management of Japanese companies in the Asian Region Masahiro Miyagawa 14. The Transformation of Japan Post into a Global Player Tim Goydke

Regional multinationals and the Korean cosmetics industry

This paper analyzes the market penetration and expansion strategy of cosmetics and toiletries multinational enterprises (MNEs) in South Korea from the perspective of regional strategy as developed recently by Rugman. We find that MNEs have different market entry and expansion strategies in the home region and in the foreign region. Home region MNEs (Japanese MNEs in this case), in general, utilize their firm-specific advantages (FSAs) better than foreign region MNEs (European and MNEs from the Americas in this case). Due to differences in transaction costs, home region MNEs exploit downstream FSAs while foreign region MNEs develop upstream FSAs. Market similarity also leads to a greater incentive to operate in the home region rather than in foreign regions. The home region effect significantly increases the likelihood of entry into foreign markets as the host country's “diamond” significantly affects the market entry strategies of MNEs.

The influence of firm-specific advantages and entry mode choice on performance: the case of Japanese foreign direct investment in Australia

The main objective of this study is examining how firm-specific factors and entry mode choice (including the non-conventional forms) of Japanese multinational enterprises determine the financial performance of their Australian subsidiaries. We expect that the firm will make choices regarding the Foreign Direct Investment (FDI) strategy in such a way as to make the best possible use of its resources in achieving its FDI goals. Firms must decide what entry mode best utilises their resources and is most likely to lead to successful financial performance. The financial performance of Japanese subsidiaries located in Australia is compared on the basis of the ownership-based entry mode of 209 subsidiaries between 1992 and 2002.

International Production and Distribution Networks in East Asia: Eighteen Facts, Mechanics, and Policy Implications*

International production/distribution networks in East Asia developed in the 1990s and after have distinctive features in their significance, extensiveness, and sophistication. This paper first lists “18 facts” on production/distribution networks in East Asia that have been identified by a number of studies using international trade data, microdata of Japanese multinational enterprises, and casual observations. It then presents a concept of two‐dimensional fragmentation as a starting point of theoretically formalizing the phenomena of fragmentation and agglomeration. It finally discusses the policy environment in which the formation of production/distribution networks has been accelerated and policy implications of the existence of such networks for economic integration in East Asia.

EU拡大と多国籍企業: 日系企業の対中東欧投資の分析

The eastern enlargement of the European Union (EU) changed the economic conditions within Europe, and the multinational enterprises (MNEs) restructure their business and operation. This paper examines the relationships between the eastern enlargement of the EU and the MNEs through the cases of Japanese foreign direct investment (FDI).From the general trend, Japanese FDI into the Central and Eastern European countries (CEECs) is relatively limited compared with both total FDI into CEECs, and total Japanese FDI into Europe, although on the increasing tendency. In addition, it shows the geographical and industrial concentration. That is, Czech Republic, Hungary, and Poland are the main recipients in CEECs, while the manufacturing sector, especially electric and electronics equipments and transport equipments, shares much higher weight than those into Western Europe. The investigation of the location pattern of Japanese plants from the supra-national perspective makes clear Japanese MNEs expand or newly enter into CEECs, rather than relocate their subsidiaries from the West to the East. The examination of the coefficient between the plant location and the sub-national regional economic character shows no significance on the demand factors, but suggests the significance of the supply side factors; i. e. the labour market conditions, the degree of the industrialisation, and the level of the infrastructure. Here, it is worth to note that the negative sign of labour market conditions is confirmed, contrary to the expectation.We can indicate some implications from the above investigation. First, the EU enlargement has a kind of announce effect on the FDI which is absorbed even before the formal membership. Second, Japanese MNEs treat CEECs as the production and export base with low wage costs, and their strategy tends to expand their presence in Europe rather than the simple relocation. Third, some significant coefficients of the sub-national factors suggest the importance of the supply side factors. Japanese MNEs tend to locate their plants in the regions with relatively high wage level, low unemployment rate, high industrialisation and good infrastructure. These as a whole have negative meanings for the economic divergence among the regions, since less developed regions in CEECs failed to attract Japanese FDI.As a future research agenda, more precise investigation, the disinvestment of Japanese MNEs, the industry-specific character, and the macroeconomic aspects of FDI are pointed out.

The Effects of Japanese Foreign Direct Investment on Bilateral Food Trade with East Asian Countries

This paper analysed the effect of Japanese foreign direct investment (FDI) on bilateral food trade with East Asian countries by applying the panel data econometrics approach to provide empirical evidence. The results indicated the existence of a complementary effect in the cases of ASEAN4 countries and China, suggesting that FDI was mainly the vertical type that promotes bilateral trade. In contrast, only an export complementary effect was detected in the cases of Hong Kong and Singapore, suggesting that FDI was mainly the horizontal type, as Japanese affiliates started to buy intermediate goods from their home country, Japan. In the cases of Korea and Taiwan, a substitution effect was found, suggesting that FDI was the horizontal type, with local production more efficient than importing goods from Japan. Japanese Multinational Enterprises (MNEs) have been interested in using the ASEAN4 countries and China as production bases, and in accessing local markets of the Newly Industrialized Economies (NIEs). The promotion of inward FDI policy in East Asia by the Japanese food industry should be achieved by more trade liberalization in the case of ASEAN4 and China but, to a lesser extent in the case of NIEs.JEL classification: P45, Q17, R11, R12

Talk softly but carry a big stick: transfer pricing penalties and the market valuation of Japanese multinationals in the United States

Corporate income tax law in OECD countries requires multinational enterprises (MNEs) to set their transfer prices according to the arm's length standard. In 1990 the United States (US) government introduced a transfer pricing penalty for cases where MNEs deviated substantially from this standard. More than two dozen other governments have followed suit. Our paper uses event study methodology to assess the impact of the US transfer pricing penalty on the stock market valuation of Japanese MNEs with US subsidiaries in the 1990s. We find that the penalty caused a drop in their cumulative market value of $56.1 billion, representing 12.6% of their 1997 market value.

Fragmentation and agglomeration matter: Japanese multinationals in Latin America and East Asia

This paper analyzes micro data of Japanese multinational enterprises (MNEs) to investigate differences between Latin America and East Asia from various viewpoints of their corporate activities. One of the crucial factors to make a sharp contrast is the development of international production/distribution networks utilizing the benefit of fragmentation and agglomeration. Japanese firms have played an important role in developing international production/distribution networks in East Asia while they have not yet either constructed a critical mass of industrial clusters or formulated efficient vertical chains of production in Latin America, where proper international commercial policies are the key for success.

Organizational Learning in Multinationals: R&D Networks of Japanese and US MNEs in the UK*

ABSTRACTThe institutional approach treats organizational forms and behaviour as contingent upon institutions that are durable and socially embedded and so several authors have argued that the nature and modes of operation of multinational enterprises (MNEs) vary according to their national origins. This paper examines the ways in which national patterns of organization and innovation affect Japanese and US MNEs’ global R&D networks and transnational learning, based on case studies of their R&D laboratories in the UK. In particular, it focuses on how these MNEs tap into foreign academic knowledge base and scientific labour through collaborative links with higher education institutions.Relative to many Japanese MNEs, US firms have developed a greater organizational capacity for coordinating globally dispersed learning and embedding themselves in local innovation networks because the liberal institutional environment within which US MNEs have developed enables them to extend their organizational and human resource systems across institutional and geographical boundaries. By contrast, Japanese MNEs appear to be more limited in their transnational learning because of the much more tightly integrated organizational and business system within which they are embedded. The paper also illustrates how the contrasting logics of the US ‘professional community’ and the Japanese ‘organizational community’ model of learning are manifested in MNEs.

Japanese Multinational Enterprises and Their Impact in the United Kingdom

Japanese Multinational Enterprises and Their Impact in the United Kingdom

The Relative Impact of Country of Origin and Universal Contingencies on Internationalization Strategies and Corporate Control in Multinational Enterprises: Worldwide and European Perspectives

We examine the importance of country-of-origin effects and of universal contingencies such as industrial recipes in organizational practices at the international level of multinational enterprises. This is based on a study comparing European (Finnish, French, German, Dutch, Swiss, Swedish, British), American and Japanese multinational enterprises. Although multinationals are highly internationalized by definition, our study shows their organizational control practices at the international level to be more than anything else explained by their country of origin. Universal contingencies such as size and industry, on the other hand, are more related to internationalization strategy. Internationalization strategy and organizational control are associated with different sets of variables; to this extent they appear more de-coupled with regard to each other than the literature suggests. Multinationals appear to follow tracks of coordination and control in which they have become embedded in their country of origin. Nationally specific institutions and culture have to be interpreted as particularistic but universally practicable facilitators of internationally competing organizational practices.