Productivity Premia of Offshoring Firms in East Asia: Evidence from Japanese Firms

During the period 2000-2009, offshore sourcing by Japanese firms to East Asian countries rapidly increased. Our survey on Japanese offshoring shows that 20 per cent of the Japanese companies are performing offshore sourcing and more than 50 per cent of the companies with 300 or more employees are conducting offshore sourcing in China and other East Asian countries mainly for the tasks of manufacturing parts and intermediate goods or assembling final goods. It is predictable that such an increase of offshoring stimulates the exit of firms with low efficiency from the market and raises the productivity of existing firms through a change of resource allocation within or between firms. Our empirical estimation based on the Japanese firm-level data shows that the productivity differs by 3 per cent between offshoring and non-offshoring firms and offshoring raises the productivity by 5 per cent ceteris paribus .