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A Two-Dimensional Analysis Of The Impact Of Outward FDI On Performance At Home: Evidence From Japanese Manufacturing Firms

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Executive Summary

This paper empirically investigates two areas of changes in firm behavior and performance at home before and after investing abroad. The first is the type of Foreign Direct Investment (FDI): horizontal FDI or vertical FDI. The second is the firm's domestic activities of interest: production activity and non-production activity. From a theoretical standpoint, the impact of outward FDIs differs not only by type, but according to the firm's activities. By exploiting two types of firm-level data that enable the authors to distinguish between production and non-production activities, the paper provides a detailed picture of the intra-firm changes in behavior and performance that occur as a result of globalizing production.

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