The Effects of Multinational Production on Domestic Performance: Evidence from Japanese Firms

Abstract

In the present paper we investigate the causal effect of becoming a multinational on home performance for a large panel of Japanese firms for the period 1995-2002. We adopt matching techniques in combination with a difference-in-difference estimator to evaluate the causal effect of establishing a foreign affiliate on productivity, output and employment. We find that Japanese outward FDI tends to strengthen the economic activities of Japanese firms in Japan in terms of both output and employment. This finding is in line with the stylized fact in the literature that FDI and exports are complements. However, we do not find a significant positive effect on productivity.

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