Location Choice and Employment Decisions: A Comparison of German and Swedish Multinationals

Using data on German and Swedish multinational enterprises (MNEs), this paper analyzes determinants of location choice and the degree of substitutability of labor across locations. Countries with highly skilled labor strongly attract German but not necessarily Swedish MNEs. In MNEs from either country, affiliate employment tends to substitute for employment at the parent firm. At the margin, substitutability is the strongest with respect to affiliate employment in Western Europe. A one percent larger wage gap between Germany and locations in Central and Eastern Europe (CEE) is associated with 760 fewer jobs at German parents and 4,620 more jobs at affiliates in CEE. A one percent larger wage gap between Sweden and CEE is associated with 140 fewer jobs at Swedish parents and 260 more jobs at affiliates in CEE. JEL no. F21, F23, J21, J23     

R&D and patenting activities of foreign firms in China: The case of Japan

This study investigates the research and development (R&D) and patenting activities of foreign firms in China. Utilizing a panel dataset of Japanese affiliates during the period 2001–2007, we first examine the determinants of R&D activity and find that local market-oriented firms place more emphasis on R&D, whereas process export-oriented firms are less likely to conduct R&D. Affiliates within a large business group that has more affiliates have a higher propensity to undertake R&D. Using only firms with positive R&D expenditures, we next estimate the patent production function. Results indicate that the patent elasticity of R&D for Japanese affiliates is high, suggesting that they are more productive on patent production than other firms. Moreover, local market-oriented firms do need more patents to protect their products, whereas scientific firms demonstrate a lower willingness to register patents in China.     

Strategies of Korean firms in china's high‐tech market: Striving for a new and sustainable business model

China has become a strategically important market for Korean companies. While cooperating with China is obviously important for their success and survival, a more difficult question lies in finding a new and sustainable business model applicable to China. This paper studies the current challenges and strategies of Korean Small and Medium‐sized Enterprises (SMEs) in the high‐tech market such as the mobile handset and online game industries that are trying to extend their business to China. It focuses on the issue that Korean firms face in order to find a way to survive and integrate with a rising China. By conducting an in‐depth firm level analysis, it examines their successes and failures in terms of what parts of the value chain they specialize in and how they establish a division of labor with China.     

International trade and within-sector wage inequality: The case of South Korea

This paper studies which factors contributed to the changes in wage inequality in Korean manufacturing over the last three decades. By adopting Akerman et al. (2013)’s decomposition method, we examine the relative importance of within-sector and between-sector wage variations in Korean manufacturing over the period of 1980–2012. Our analytic results confirm that within-sector wage variation explains the lion’s share of overall wage inequality. Taking this finding into account, we estimate the impacts of international trade, skilled-biased technological change and labor market conditions on within-sector wage inequality in Korea. Our estimation results suggest that there was a structural change in determinants of wage inequality before and after the mid-1990s. The influence of international trade mainly through heightened import competition on wage dispersion became relatively more conspicuous over the last two decades.     

Ranking Locations for Japan's Manufacturing Multinationals in Asia: A Literature Survey Illustrated with Indexes*

This paper first reviews the voluminous, recent literature related to location choice by Japan's multinational corporations (MNCs) in Asian manufacturing. This review suggests that host economy size, labor costs (defined to include the influences of productivity and labor quality) and agglomeration of Japanese investors were among the most important factors influencing location choice by Japanese MNCs. However, evidence regarding a wide range of other potential determinants was more mixed. Principles underlying the literature review are then illustrated by constructing an index of investment attractiveness from 140 components used to measure the influence of 10 groups of determinants, and ranking the 11 largest Asian hosts to Japan's manufacturing MNCs in a baseline and 14 alternative scenarios. The baseline and four of the five alternative scenarios prioritizing local or export markets reveal China to be the most favorable location, usually followed by Singapore and Hong Kong. In nine alternative scenarios with lower weights on domestic and export markets but higher weights for cost factors, Singapore, followed by Hong Kong and China, were usually the most attractive locations. At the other end of the scale, India, Vietnam and the Philippines ranked lowest in the baseline and in most alternative scenarios, with Indonesia ranking slightly higher. Baseline index rankings were similar to rankings of affiliate sales for China, India, Vietnam and the Philippines, but diverged for the other seven economies.     

Do Multinational Enterprises Relocate Employment to Low-Wage Regions? Evidence from European Multinationals

This paper analyzes the employment behavior of home multinational enterprises (MNEs) in Europe. To this end we use a unique firm-level panel data set of more than 1,000 European multinational parent enterprises and their European affiliates. We find for parent firms operating in the manufacturing sector that the labor cost elasticity of parent employment with respect to North EU affiliates’ labor costs is positive and statistically significant. This implies employment substitution between parents and their North EU based affiliates takes place in response to wage cost differentials between the parent and its North EU based affiliates. In contrast, we find no evidence for such substitution effects between parent employment and its affiliates that are located in low-wage regions in the EU and in Central and Eastern Europe. JEL no. F23, J23     

Employment in domestic plants and foreign affiliates: A note on the elasticity of substitution

Conclusions For a high-wage country like Austria, it is commonly expected that growing employment in foreign affiliates substitutes jobs at home. This paper provides a simple framework for estimating the determinants of relative labor demand (abroad in relation to that at home) bilaterally. It is based on the relationship of (dis)economies and transportation costs under the hypothesis that goods trade is an imperfect substitute for foreign production in the case of horizontal investments, while with respect to vertical investments, goods trade is solely dependent on relative market size. The estimates are based on bilateral industry-level data on foreign affiliates and the domestic activities of Austrian manufacturing firms, covering the period 1990–1996, the 10 most important host countries and 7 industrial sectors.     

Occupational Composition Within Multinational Firms: Evidence From Korean Employer-Employee Matched Data

Using Korean employer-employee matched data, we investigate the difference in occupational structure between domestic and multinational firms in manufacturing sectors. The main result shows that the occupational composition of the multinational firms is more skewed toward high-skills and service occupations than domestic firms. Furthermore, we find the heterogeneous labour structure among multinational firms upon types and locations of foreign affiliates. The multinationals that are establishing production plants or locating their affiliates in emerging countries tend to be composed of relatively smaller share of high-skills and service occupations than those with foreign R&D centres or business branch or with affiliates located in advanced countries.     

Past and future of the labor force in emerging Asian economies

In this paper we investigate the determinants of past changes in the labor force of 12 emerging Asian countries, and attempt to make projections of the labor force in those countries for the period 2010–2030. Results from our regression analysis of the labor force indicate that the wage earnings elasticity of labor supply is negative, albeit insignificant, for men and significantly positive for women, and it has a significantly positive association with educational level and a negative one with age. We also find that per capita income shows a negative relationship with the labor force in general for younger age groups and older age groups, and more capital-intensive countries have smaller female labor force. Using extrapolation, the paper predicts that the labor force will increase in all 12 countries during the first two decades of the period 2010–2030, but will eventually decline in China, Hong Kong, Singapore, South Korea, and Taiwan. The paper also makes projections of the unemployment rate and the average working hours in those countries.     

Foreign Investment,Divestment and Relocation by Japanese Electronics Firms in East Asia*

Although foreign divestment and international relocation by multinational firms carry important economic implications for the industrialization of East Asian countries, there has been little empirical research on these issues. In this paper we analyze the magnitude and pattern of foreign divestment and relocation by Japanese electronics firms in nine East Asian countries during 1995–2003. The average annual divestment rate of electronics manufacturing affiliates is 3 percent, but divestment patterns diverge strongly across countries. Divestments are much more frequent in higher labor cost countries and in approximately one‐third of cases are accompanied by relocations to lower wage countries, particularly to China. Evidence is found for rivalry between China and ASEAN countries in attracting foreign direct investment, but the growing attractiveness of China has not been accompanied by a reduction in employment in Japanese affiliates in ASEAN countries (with the exception of Singapore). Divestments and relocations are related to Japanese firms’ strategy to reconfigure their Asian production networks in response to changing competitiveness, regional integration, and changes in local investment environments.     

浅析杜鲁门政府时期美国对远东地区的战略转变

冷战迫使美国重新分析日本在美国全球战略中的地位.美国对日本政策的调整带动了美国对韩国政策的调整,即收缩在韩国的军事力量,回避直接介入朝鲜半岛,主要通过政治、经济援助来稳定韩国的局势.美日韩三国同盟明显体现了“分工理论”.     

Ethnic Migrants' Employment and Industry Distribution in the Cities of China

In recent years, urban researchers have differentiated the concept of ethnic niches into industrial and occupational niches. This research was done in four selected cities in four different areas of China: Shenzhen (South), Huhhot (North), Qingdao (East), and Kunming (West). An important aspect of understanding a multiethnic city is to explore the labor market performance of ethnic groups. This paper mainly covers the employment and industry distribution of ethnic migrants(Korean, Mongolian, Yi, Bai, Hui, and Dai) in cities of China.     

Role of human capital on regional distribution of FDI in China: New evidences

This paper investigates the regional distribution of FDI in China with a focus on human capital from completely different and unique measurement. The novelty is the use of a set of six human capital indices: endowment, utilization, demography, productivity, support and health. It uses panel data estimation for 31 regions of China for 2002–2013 with the consideration of usual determinant variables in FDI study. The results suggest that foreign investors value the availability of human resources, both in terms of present (endowment) and future (demography) supply, as the most important factor in making their investment decisions. Health of labor force and quality of people working in scientific and technical fields were also found to be significant. Furthermore, local market size, infrastructure and location (being in coastal region) are significant determinants with western region, compared to central and northeastern regions, losing out the most to eastern region.     

Assessing foreign direct investment relationships between China,Japan, and the United States

China has received enormous inflows of foreign direct investment (FDI) in recent years, including significant flows from Japan and the US. We examine these investment flows in detail to gain perspectives on their relative importance for the three countries involved. We also analyze the industrial composition of FDI flows over time. American FDI flows to China have been less concentrated in manufacturing than average for investors in China while Japan's FDI flows have been much more concentrated in manufacturing, particularly in transport, electrical and machinery industries in recent years. Using survey data from American and Japanese affiliates, we compare the employment patterns and sales destinations of American and Japanese affiliates in China. We find a much higher degree of export-orientation for Japanese affiliates than American affiliates, with the latter tending to make the vast majority of their sales in the Chinese market. Over time, however, we find a tendency towards convergence in the sales destinations of Japanese and American affiliates.     

Spatial determinants of Japanese FDI in China

Research on foreign direct investment in China has spawned an increasingly large literature. Whilst regional cleavages with respect to the distribution of foreign direct investment (FDI) are acknowledged, empirical research on the spatial determinants of FDI in China has been limited. Furthermore, research on the spatial determinants of home country FDI in China has thus far been neglected due to difficulties in accessing the appropriate data. The objective of this paper is to examine the spatial determinants of Japanese direct investment in China by using an econometric model. To that purpose, a dataset is created from the Toyo Keizai directory on the overseas activities of Japanese companies. The results show that tertiary education, inland waterways, as well as coastal location are positive and significant determinants of Japanese investment in China.     

中韩合作解决朝核问题探析

自20世纪90年代开始,朝核问题成为威胁东北亚地区安全与稳定的隐患。朝鲜半岛是美国、中国、日本、俄罗斯等国家博弈的焦点。中韩两国在半岛无核化、东北亚地区和平与稳定方面拥有共同利益,从而使两国在朝核问题上存在合作的基础,前景较为广阔。     

Affiliates and parent employment through foreign direct investment: a study case of substitutability or complementarity

How does outward foreign direct investment (FDI) affect employment of multinationals in the home country? Does the impact of outward investment differ among manufacturing and service sectors? Using data on Italian MNEs, this paper examines the impact of Italian outward FDI on local employment between 1998 and 2006. In particular, we investigate the relationship existing between employment in the parent company and employment in foreign affiliates by distinguishing according to host-country location and sector of activity. The results suggest that the effects of Italian outward FDI on domestic employment differ according to the sector and the country of destination. In the manufacturing sector, a weak but significant relationship of labour substitutability is found for Italian MNEs producing low-technology products in foreign affiliates localized in high-wage countries. On the other hand, a significant North–south complementarity relationship in labour demands appears in the High and Medium-high- technology sectors. In the service sector, we find strong complementarity between employment in the parent firm and employment in foreign affiliates: in particular, this regards Italian MNEs producing knowledge-intensive services both in Western affiliates and CEEC locations. These results are robust when we control for endogeneity of output and parent wages.     

跨国公司地区总部区位分布的特征与决定因素

文章以福布斯2008年排行榜全球2000家企业在中国设立的地区总部为研究对象,对其分布的特征及决定因素进行了研究。研究发现：在分布特征上,跨国公司地区总部在我国呈现出了地区集聚（96％集中于北京、上海两个城市）和国别集聚（73．9％集中于美日等6个国家）的特点;在决定因素上,最为显著的指标是城市大小与人口规模、第三产业占GDP比重和信息传递水平。研究还表明：跨国公司在我国选择非政治、商业、金融中心的城市时,表现得极为谨慎;同时,全球仅有34．3％的跨国公司在我国设立地区总部,说明世界各国在我国的投资强度目前仍较弱。     

Labor Militancy in South Korea*

Korea has adopted the labor institutions of Japan, which are noted for ensuring industrial peace unparalleled elsewhere, fostering worker‐management cooperation: company unionism, no temporary layoffs, synchronized annual contracts, seniority‐based wages, and the bonus system. Yet the labor relations in Korea have been turbulent for the last 15 years, with its strike intensity exceeding that of any industrialized country during most of that period. Why is labor so militant in South Korea? This research identifies two types of factors responsible for Korean labor militancy. First are sociopolitical factors: abrupt decontrol of labor relations in 1987 for which labor and management were and continue to be ill prepared, and the dominance of the age‐cohort of young, assertive workers in the workforce. The second factor is that Korean industrial policy and structure are shown to encourage union militancy as an unintended consequence.     

A macroeconomic model of direct investment in foreign affiliates of Japanese firms

This paper analyses the operations of the Japanese multinational corporations in the world economy by constructing and estimating a Japanese foreign direct investment system. This system models the determinants of manufacturing foreign direct investment (FDI), the trade between Japan and her overseas affiliates as well as the sales of the manufacturing subsidiaries and those of the trading subsidiaries. The error-correction modelling techniques are adopted for estimation in order to capture both the short- and long-run adjustment processes. Finally, simulations are conducted on the model to analyse the effects of changes in the world economy.