Expanding Fragmentation of Production in East Asia and Domestic Operations: Further Evidence from Japanese Manufacturing Firms

This paper investigates the pattern of globalizing corporate activities of Japanese manufacturing firms and their domestic operations and international trade. More specifically, we compare changes in domestic operations and international trade of firms expanding operations in East Asia with those of firms not expanding operations in two contrastive periods, 1998-2002 and 2002-2006. In addition, we conduct analyses incorporating the information on the globalizing behavior in the former period for the latter period and analyses focusing only on non-MNEs or MNEs in line with the literature. Our study demonstrates that Japanese manufacturing firms with expanding operations in East Asia are more likely to increase domestic employment and the number of domestic affiliates and establishments as well as to intensify export/import activities with the region, particularly in the latter period, by effectively utilizing the mechanics of production process-wise division of labor in East Asia.