Working Paper: NBER ID: w7693
Authors: Magnus Blomström; Denise Konan; Robert E. Lipsey
Abstract: This paper examines how inward and outward foreign direct investment (FDI) have influenced the restructuring of the Japanese economy and can be expected to continue to do so in the future. We find that outward investment has helped Japanese firms to sustain foreign market shares and contributed to the restructuring of the Japanese economy away from older industries. By shifting from exporting to affiliate production, there has been a geographical reallocation of the activities of Japanese firms, particularly those of multinational manufacturing firms. However, Japanese outward FDI is still not very large relative to the Japanese economy, despite the rapid growth since the mid-1980s, and there is still scope for significant increase when compared with the levels of most other OECD countries. Inward FDI will presumably have an even stronger impact on the restructuring of the Japanese economy. Although the stock of inward foreign direct investment is still very small, there are important changes under way. Deregulation has opened up much of the industrial and service sectors to foreign multinationals.
Keywords: No keywords provided
JEL Codes: F23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| outward FDI (F23) | restructuring of the economy (P21) |
| inward FDI (F21) | restructuring of the economy (P21) |
| inward FDI (F21) | introduction of new skills and technologies (O35) |
| introduction of new skills and technologies (O35) | enhancing competitiveness (F23) |
| inward FDI (F21) | competition among firms (L13) |
| competition among firms (L13) | shrinkage or disappearance of less competitive Japanese firms (L19) |