論文の公開元へJapanese investment location decision in the u.s. : Evidence of a home-country firm bandwagon effect
概要
Historically, Japan relied on exporting rather than investing abroad to finance its development (Murphy, 2010). Following a classical internationalization model of increasing commitment (Johanson and Vahlne, 1977), Japanese firms complemented their export-led growth by conducting outward foreign direct investment (FDI) to respond in part to the demands of the new globalization order. This new order has been characterized by an “increasing cross-border mobility of goods, services, capital and people facilitated by technological change, the rise of multinational enterprises (MNEs) and the liberalizing policies of nation states and international regulatory institutions”, leading to “growing economic interdependence and integration between countries” (Roberts and Fuller, 2010, p. 902). Indeed, economic growth, relative political stability, deregulation, and advances in communication technologies and transportation, which marked the years after World War II, created favorable conditions for Japanese companies to engage in FDI. These changing externalities brought about by globalization have been reshaping market imperfections, which by nature prevent perfect competition and therefore optimum operation.
The field of international business (IB) has argued that the raison d’être for MNEs is their ability to exploit those market imperfections (Caves, 1971) by internalizing some of their operations to either reduce costs or increase benefits through better quality or innovation (Hymer, 1976; Buckley and Casson, 1976). By the same token, Japanese firms have been increasingly engaging in FDI as one way to bypass imperfections and exploit market opportunities through internal operations. Data from the Japan External Trade Organization (JETRO), a quasi- governmental agency, indicates that Japan’s outward investments have been increasing steadily over the past 20 years, with a year-on-year growth rate of about 9.1%, while its economy has contracted by 0.5% over the same period, as measured by GDP in real terms (JETRO, 2018). The years 2016 and 2017 logged record outward FDI, USD 174 billion and USD 169 billion respectively, since comparable numbers were first documented in 1996. Over almost the same period, between 1996 and 2016, Japan’s exports of goods and services in constant 2010 US dollar, went from USD 438 billion to USD 981 billion, registering a year-on-year growth rate of about 3.9%, less than half than that of outward investment (World Bank, 2018). It has therefore become clear that the growth of Japanese firms originates today more from outward investment than exports.
Over the past few years, the gap between inward FDI flows to developing and developed economies has been shrinking, and as of 2017, the latter was only 6% lower than the former, amounting to USD 671 billion compared to USD 712 billion (UNCTAD, 2018). This trend notwithstanding, the United States (US) remains today the largest investment destination for Japan, attracting about 30% of its total investment, or USD 491 billion out of its stock of USD 1.55 trillion as of 2017 (JETRO, 2018)1. Furthermore, Japan has consistently been ranking as the second largest foreign direct investors in the US economy, after the United Kingdom (Cortez, 2017). And the country holds by far the largest stock of FDI in the US, 68%, from firms headquartered in Asia- Pacific (BEA, 2017)2.
What is driving Japanese firms to continue investing heavily in the US? A survey conducted in 2016 by JETRO sheds light on some of the drivers and impediments for investments by Japanese companies in Southern California (JETRO, 2016). It informs on the factors that likely influence location choice for Japanese firms having decided to invest in the US. As for advantages of California as an investment destination, Japanese firms highlighted market size (58.3%), size of the Japanese community (33.8%), logistics/transportation (20.1%), and geographical proximity to Japan (19.8%) (n=343). As for impediments, they cited labor costs including benefits (76.4%) and taxes (55%) (n=318) (JETRO, 2016).
So economic attractiveness aside, if California is any indication of the country at large, do Japanese investing firms really give much importance to the presence of other Japanese actors when selecting a state for their operations? This paper aims to examine the effect of same-country firm concentration on Japanese firm FDI location decision in the US at the subnational level, in other words when deciding between states as competing locations. This work builds on previous research that has highlighted the importance of location-specific factors at the subnational level when deciding to invest in a given country (Beugelsdijk and Mudambi, 2014). Hernandez (2014) showed that firms make subnational location decisions in order to maximize learning and knowledge acquisition opportunities, partly drawn from the concentration of immigrants, established home-country firms, and industry. He confirmed that states with higher immigrant concentration witnessed higher FDI by firms from the same countries, but that the concentration of home-country firms had no effect (Hernandez, 2014). Blanc-Brude, Cookson, Piesse, and Strange (2014), in an extensive review of empirical studies of FDI location choice between countries at the regional and subnational levels, concluded that despite inconsistent findings, location-specific characteristics consisting of local market attractiveness, agglomeration advantages, labor cost and quality, infrastructure, and favorable institutions, mattered most.
This paper contributes to the existing literature on FDI decision location at the subnational level in two ways. First, identifying the current motives of Japanese firms for FDI location at the subnational level is indispensable. Hennart (2016) argued that much FDI research remains to be done since some phenomena are still not yet fully explained and correctly understood. In particular, he singles out Japanese firms whose investments have not always conformed to mainstream theories. As shown above, the US remains a preferred destination for Japanese investment and as such should be carefully studied. Therefore, in this research, I use a single source country, Japan, and a single receiving country, the US, in order to better isolate the relationship between firm location decision at the subnational level and state attributes.
Second, while research on the bandwagon effect in FDI is not new, past studies have not addressed the state of recent Japanese FDI in the US. Previous works have not explicitly considered FDI location decision of Japanese investment in the US at the subnational level. Many are dated and in need of updated evidence, Most focus on aggregate data for either the source country, destination country, or both. They are concerned with country-level rather than subnational location choice. And some use small-sample qualitative methods calling for more rigorous empirical scholarship. For instance, Henisz and Delios (2001) studied the plant location decisions of 2,705 Japanese subsidiaries over a set of 155 countries over the period 1990-1996. Lu (2002) considered entry mode choice, not location decision, in a sample of 1,194 manufacturing greenfield subsidiaries of Japanese manufacturing firms into 12 developed countries as of 1999. Hernandez (2014) considered the combined FDI from 27 countries into the US between 1998 and 2003, without disaggregating the results by source country. And Hemmert and Jackson (2016) used a qualitative comparative case-study approach contrasting the internationalization processes of two Japanese and two Korean firms.
I first review briefly the literature on the motives for FDI, FDI location choice, and the bandwagon effect, with an emphasis on Japanese investment. Then I present hypotheses derived from the previous review and the logit regression method used to test them. Last, the results are followed by a detailed discussion and implications for research and practice.
