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CGP International Conference (May 2004)

CGP International Conference (May 2004). Foreign Outsourcing and Firm-level Characteristics: Evidence from Japanese Manufacturers Eiichi Tomiura. Foreign Outsourcing (FO). Increasing international fragmentation of production processes Active foreign trade in intermediate inputs

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CGP International Conference (May 2004)

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  1. CGP International Conference (May 2004) Foreign Outsourcing and Firm-level Characteristics: Evidence from Japanese Manufacturers Eiichi Tomiura

  2. Foreign Outsourcing (FO) • Increasing international fragmentation of production processes • Active foreign trade in intermediate inputs • Political reactions and widespread debates • But, very little quantitative information, other than aggregate statistics, business anecdotes or future projections.

  3. Purposes of our research • Directly measuring FO, explicitly distinguished from domestic outsourcing, at the firm level, from a comprehensive sample. • Discussing its relationship with various firm-level characteristics. (Who chooseFO?)

  4. Previous studies • Imported inputs in input-output tables (Campa and Golberg (1996), Feenstra and Hanson(1997)) • Foreign trade of parts & components (Yeats(2001)) • Processing trade, foreign trade zones (Feenstra et al.(2000)) • Micro data (Swenson (2000), Gorg and Hanley (2003)) • Theoretical models of incomplete contract (Antras (2003), Grossman and Helpman (2002))

  5. Our firm-level data • Survey conducted by MITI in 1998 • Covering all manufacturing industries • Without firm-size thresholds • Including firms without outsourcing • Firm-level data on Q, L, K, R&D, IT, etc. • 118,300 manufacturing firms as a sample

  6. Definition of FO in the survey • Def: “contracting outof manufacturing or processing to other firms” • Non-production services not included. • Arm’s-length purchase of standardized parts not included. • Partly-owned FDI affiliates included. • Contracts by “wholesalers” not included.

  7. Number of Firms

  8. Share of FO

  9. Firm size

  10. Productivity

  11. IT (Use of computers)

  12. Empirical models • Heckman’s two-step estimation

  13. Estimation results • l significant (Selection by Human skill (or Firm size) & Foreign business experience). • Productivity (+) (esp. FO) • IT (+) (both FO & DO) • K/L, H/L (-) (esp. FO) • R&D (+) (both FO & DO) • Firm size (-) (esp. FO)

  14. Concluding remarks • Confirmed previous aggregate findings by firm-level data, and revealed previously unnoticed inter-firm heterogeneity. • Outsourcing of non-production services is not covered in this survey. • International comparison necessary. But, no other comprehensive firm-level data are currently available.

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