IDEAS home Printed from https://ideas.repec.org/p/kob/dpaper/dp2019-06.html
   My bibliography  Save this paper

Firm Heterogeneity and the Activity of Japanese Manufacturing Multinationals in India

Author

Listed:
  • Hiroyuki Nishiyama

    (School of Economics, University of Hyogo, Japan)

  • Azusa Fujimori

    (Faculty of Management, Osaka Seikei University, Japan)

  • Takahiro Sato

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

Abstract

This paper anatomizes the linkage between country/region characteristics and Japanese MNE activity in India from both theoretical and empirical sides. We construct a North-South firm-heterogeneity model with FDI and exchange rate. We use this model to make three contributions: First, we theoretically reveal how country characteristics affect the average sales of the firm in the host country. Secondly, we make clear the state-level characteristics on three main industrialized areas in India using the data from some valuable databases. Thirdly, we estimate determinant factors of average sales of each Japanese affiliate firms in India focusing on regional characteristics derived in the theoretical part using firm-level data. We also construct several proxy variables of determinant factors of average sales in state-level and put into estimated regression equation. This empirical analysis targets at the 1990s and 2000s. Over this period, India enjoyed steady economic growth and it can be linked with increase of FDI inflow and technological spillover from MNEs. We find out that some regional characteristics such as level of human-capital or transportation cost in each state and also exchange rate have a significant effect on average sales of each Japanese affiliate firms in India.

Suggested Citation

  • Hiroyuki Nishiyama & Azusa Fujimori & Takahiro Sato, 2019. "Firm Heterogeneity and the Activity of Japanese Manufacturing Multinationals in India," Discussion Paper Series DP2019-06, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2019-06
    as

    Download full text from publisher

    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2019-06.pdf
    File Function: First version, 2019
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
    2. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-1721, September.
    3. Nicolas Berman & Philippe Martin & Thierry Mayer, 2012. "How do Different Exporters React to Exchange Rate Changes?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(1), pages 437-492.
    4. John Sutton, 2004. "The Auto-component Supply Chain in China and India - A Benchmark Study," STICERD - Economics of Industry Papers 34, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    5. Yasuyuki Todo, 2011. "Quantitative Evaluation of the Determinants of Export and FDI: Firm‐level Evidence from Japan," The World Economy, Wiley Blackwell, vol. 34(3), pages 355-381, March.
    6. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
    7. Sutton, John, 2004. "The auto-component supply chain in China and India: a benchmark study," LSE Research Online Documents on Economics 2292, London School of Economics and Political Science, LSE Library.
    8. Hayakawa, Kazunobu & Matsuura, Toshiyuki, 2011. "Complex vertical FDI and firm heterogeneity: Evidence from East Asia," Journal of the Japanese and International Economies, Elsevier, vol. 25(3), pages 273-289, September.
    9. Holger Gorg & Henning Muhlen & Peter Nunnenkamp, 2010. "FDI Liberalisation, Firm Heterogeneity and Foreign Ownership: German Firm Decisions in Reforming India," Journal of Development Studies, Taylor & Francis Journals, vol. 46(8), pages 1367-1384.
    10. Okada, Aya, 2004. "Skills Development and Interfirm Learning Linkages under Globalization: Lessons from the Indian Automobile Industry," World Development, Elsevier, vol. 32(7), pages 1265-1288, July.
    11. Rashmi Banga, 2006. "The export-diversifying impact of Japanese and US foreign direct investments in the Indian manufacturing sector," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 37(4), pages 558-568, July.
    12. Head, Keith & Ries, John, 2003. "Heterogeneity and the FDI versus export decision of Japanese manufacturers," Journal of the Japanese and International Economies, Elsevier, vol. 17(4), pages 448-467, December.
    13. Hayakawa, Kazunobu & Tsubota, Kenmei, 2014. "Location choice in low-income countries: Evidence from Japanese investments in East Asia," Journal of Asian Economics, Elsevier, vol. 33(C), pages 30-43.
    14. Tomiura, Eiichi, 2007. "Foreign outsourcing, exporting, and FDI: A productivity comparison at the firm level," Journal of International Economics, Elsevier, vol. 72(1), pages 113-127, May.
    15. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    16. repec:hal:spmain:info:hdl:2441/6apm7lruv088iagm4rv2c33jtg is not listed on IDEAS
    17. Peter J. Buckley & Adam R. Cross & Sierk A. Horn, 2012. "Japanese foreign direct investment in India: An institutional theory approach," Business History, Taylor & Francis Journals, vol. 54(5), pages 657-688, November.
    18. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," Post-Print hal-03579844, HAL.
    19. Ryuhei Wakasugi (ed.), 2014. "Internationalization of Japanese Firms," Springer Books, Springer, edition 127, number 978-4-431-54532-3, January.
    20. Siddharthan, N. S., 1998. "Differential behaviour of the Japanese affiliates in the Indian automobile sector," Japan and the World Economy, Elsevier, vol. 10(1), pages 97-109, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hiroyuki Nishiyama & Azusa Fujimori & Takahiro Sato, 2022. "Regional disparities, firm heterogeneity, and the activity of Japanese manufacturing multinationals in India," Pacific Economic Review, Wiley Blackwell, vol. 27(5), pages 462-488, December.
    2. Joachim Wagner, 2016. "International Trade and Firm Performance: A Survey of Empirical Studies since 2006," World Scientific Book Chapters, in: Microeconometrics of International Trade, chapter 2, pages 43-87, World Scientific Publishing Co. Pte. Ltd..
    3. Todo, Yasuyuki & Sato, Hitoshi, 2014. "Effects of presidents’ characteristics on internationalization of small and medium firms in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 34(C), pages 236-255.
    4. Arita, Shawn & Tanaka, Kiyoyasu, 2011. "Simulating heterogeneous multinational firms," IDE Discussion Papers 296, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    5. Banri Ito & Ayumu Tanaka, 2016. "External R&D, productivity, and export: evidence from Japanese firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(3), pages 577-596, August.
    6. TODO Yasuyuki & SATO Hitoshi, 2011. "Effects of CEOs' Characteristics on Internationalization of Small and Medium Enterprises in Japan," Discussion papers 11026, Research Institute of Economy, Trade and Industry (RIETI).
    7. Nishiyama, Hiroyuki, 2017. "The effect of exchange rate fluctuation on intra-industry reallocation in a firm heterogeneity model with trade and foreign direct investment," The Quarterly Review of Economics and Finance, Elsevier, vol. 64(C), pages 32-43.
    8. Kenneth S. Chan & Miaojie Yu, 2016. "Special Section: China's Growing Trade and its Role to the World Economy," Pacific Economic Review, Wiley Blackwell, vol. 21(1), pages 32-34, February.
    9. Yuko Imura, 2023. "Reassessing Trade Barriers with Global Production Networks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 77-116, December.
    10. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2018. "Global Firms," Journal of Economic Literature, American Economic Association, vol. 56(2), pages 565-619, June.
    11. Anders Akerman & Rikard Forslid, 2009. "Firm Heterogeneity and Country Size Dependent Market Entry Costs," Global COE Hi-Stat Discussion Paper Series gd09-056, Institute of Economic Research, Hitotsubashi University.
    12. Gregory Corcos & Massimo Del Gatto & Giordano Mion & Gianmarco I.P. Ottaviano, 2012. "Productivity and Firm Selection: Quantifying the ‘New’ Gains from Trade," Economic Journal, Royal Economic Society, vol. 122(561), pages 754-798, June.
    13. Monte, Ferdinando, 2011. "Skill bias, trade, and wage dispersion," Journal of International Economics, Elsevier, vol. 83(2), pages 202-218, March.
    14. Kristian Behrens & Giordano Mion & Yasusada Murata & Jens Südekum, 2014. "Trade, Wages, And Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(4), pages 1305-1348, November.
    15. Matthieu Crozet & Keith Head & Thierry Mayer, 2012. "Quality Sorting and Trade: Firm-level Evidence for French Wine," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(2), pages 609-644.
    16. Alfonso Irarrazabal & Andreas Moxnes & Luca David Opromolla, 2013. "The Margins of Multinational Production and the Role of Intrafirm Trade," Journal of Political Economy, University of Chicago Press, vol. 121(1), pages 74-126.
    17. Sun, Churen & Yu, Zhihao & Zhang, Tao, 2012. "Agglomeration and Trade with Heterogeneous Firms," MPRA Paper 49001, University Library of Munich, Germany, revised 17 Aug 2013.
    18. Henk L. M. Kox, 2013. "Export Decisions of Services Firms Between Agglomeration Effects and Market-Entry Costs," Advances in Spatial Science, in: Juan R. Cuadrado-Roura (ed.), Service Industries and Regions, edition 127, chapter 0, pages 177-201, Springer.
    19. Cardoso-Vargas, Carlos Enrique, 2015. "Productivity, size and exporting dynamics of firms: Evidence for Mexico," MPRA Paper 68425, University Library of Munich, Germany, revised 09 Jul 2015.
    20. Nihan Nur Akhan & Anil Donmez & Refik Erzan & Tolga Umut Kuzubas, 2018. "Exchange Rates and Export Behavior: Firm-level Evidence from Turkey," Working Papers 2018/02, Bogazici University, Department of Economics.

    More about this item

    Keywords

    Firm heterogeneity; foreign direct investment; India; Japanese multinational enterprises;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kob:dpaper:dp2019-06. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Office of Promoting Research Collaboration, Research Institute for Economics & Business Administration, Kobe University (email available below). General contact details of provider: https://edirc.repec.org/data/rikobjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.