Debt,R&D investment and technological progress: A panel study of Japanese manufacturing firms' behavior during the 1990s

Based on a panel data set of Japanese manufacturing firms in research-intensive industries, we investigate quantitatively the extent to which outstanding debt affected firms' R&D activities during the 1990s. We find that massive amounts of outstanding debt had a significant, negative effect on R&D investment during that time. We also find that R&D expenditures were closely linked to firm-level total factor productivity growth over the same period. In fact, a ten-percentage-point increase in the debt–asset ratio lowered the rate of firm-level total factor productivity growth by 0.26 percentage points between 1999 and 2001, because it reduced R&D activities. J. Japanese Int. Economies 21 (4) (2007) 403–423.     

Vertical linkages and agglomeration effects in Japanese FDI in Thailand

This paper formally investigates how industrial linkages between Japanese firms in Thailand affect the inter-industry pattern of FDI. It does so in the context of a model of FDI where production is vertically integrated between the home and host economies, using a distinctive industry data set constructed from firm-level information. The econometric evidence indicates that, in addition to the factors that facilitate vertical integration (lower transport costs, lower labour cost, etc.), the opportunity to create industrial linkages or supply networks leads to additional clustering or agglomeration of FDI. J. Japanese Int. Economies 20 (2) (2006) 193–208.     

The impact of technology transfer and R & D on productivity growth in Taiwanese industry: Microeconometric analysis using plant and firm-level data

This paper conducts a comparative empirical analysis of the impact of R & D spending and purchases of foreign technology on output and productivity in Taiwanese industry. We employ data from two different sources, providing an econometric perspective on this question at two different levels of aggregation. We first conduct empirical analysis using data from the Taiwanese government's industrial census of technological activities at the plant level. This study is, to the best of our knowledge, the first empirical analysis using these data. We complement these results with analyses of data at the firm level. The results of our regression analyses generally support the conclusion that both R & D spending and purchases of foreign technology have contributed positively to Taiwanese productivity growth. J. Japanese Int. Economies 20 (2) (2006) 177–192.     

Zombie firms and economic stagnation in Japan

It is often claimed that one contributing factor to Japan's weak economic performance over the past decade is that Japanese banks have continued to provide financial support for highly inefficient, debt-ridden companies, commonly referred to as ‘zombie’ firms. Such poor banking practices in turn prevent more productive companies from gaining market share, strangling a potentially important source of productivity gains for the overall economy. To explore further the zombie-firm hypothesis, we use industry- and firm-level Japanese data and find evidence that productivity growth is low in industries reputed to have heavy concentrations of zombie firms. We also find that the reallocation of market share is going in the wrong direction in these industries, adding to already weak productivity performance. In addition, we find evidence that financial support from Japanese banks may have played a role in sustaining this perverse reallocation of market share.

The industry origins of Japanese economic growth

This paper presents new data on the sources of growth for the Japanese economy over the period 1960–2000. The principal innovation is the incorporation of detailed information for individual industries, including those involved in the production of computers, communications equipment, and electronic components as information technology equipment. We show that economic growth is dominated by investments and productivity growth in information technology, both for individual industries and the economy as a whole. We also show that the revival of total factor productivity growth accounts for the modest resurgence of the Japanese economy since 1995. J. Japanese Int. Economies 19 (4) (2005) 482–542.     

Competition and productivity in Japanese manufacturing industries

This paper examines the determinants of productivity in Japanese manufacturing industries, looking particularly at the impact of product market competition on productivity. Using a newly available panel data on around ten thousand firms in Japanese manufacturing for the years 1994–2000, I show that competition, as measured by lower level of industrial price–cost margin, enhances productivity growth, controlling for a broad range of industrial and firm-specific characteristics. Moreover, I suggest that market power, as measured by either individual firm's price–cost margin or market share, has negative impact on productivity level of R & D performing firms. J. Japanese Int. Economies 19 (4) (2005) 586–616.     

Does information technology raise Japan's productivity?

A standard growth accounting exercise indicates that, after Japan's “lost decade,” its overall total-factor-productivity (TFP) growth has increased notably since 2000. This productivity revival has been limited, however, to information technology (IT) production—has not been a broad-based productivity acceleration like that seen in the United States after the mid-1990s. This paper examines the relationship between IT and productivity gains by employing the “augmented” growth accounting framework for Japanese industry-level data from 1975 through 2005. In particular, we estimate “purified” technology change at industry level by accounting for cyclical mismeasurement of inputs. We find that the post-2000 increase in overall TFP growth does indeed appear to arise from an increase in technological change. Furthermore, the pickup in technology growth has occurred not only in the production of IT but also in the industries that use IT intensively. Our results suggest the possibility that stories of IT as a general purpose technology (GPT) could apply to Japan as well as to the United States.     

Corporate diversification,performance, and restructuring in the largest Japanese manufacturers

This article examines the industry diversification of the 142 largest Japanese manufacturers in 1973–1998. We find that sample firms steadily increased diversification. Despite the increase, the relatedness of their business measured in three ways based on the Japanese IO table stayed essentially constant. Regression results show that the average relationship between diversification and firm performance is negative. Firms can mitigate the negative impact of diversification on profitability by confining diversification to industries that are closely related to their main business. However, this effect of relatedness is insignificant for firm value (Tobin's Q), suggesting that the profitability increase due to greater relatedness does not last long. Consistently, a wide range of diversified firms restructured themselves in the late 1990s by divesting business units. J. Japanese Int. Economies 21 (3) (2007) 303–323.     

Is China's FDI coming at the expense of other countries?

We analyze how China's emergence as a destination for foreign direct investment is affecting the ability of other countries to attract FDI, using an approach that accounts for the endogeneity of China's FDI. Results suggest that China's rapid growth and attractions as a destination for FDI also encourages FDI flows to other Asian countries, as if producers in these economies belong to a common supply chain. There is also evidence of FDI diversion from OECD recipients. We interpret this in terms of FDI motivated by the desire to produce close to the market where the final sale takes place. Firms more inclined to invest in China for this reason are correspondingly less inclined to invest in the OECD. A detailed analysis of Japanese foreign direct investment outflows disaggregated by sector further supports these conclusions. J. Japanese Int. Economies 21 (2) (2007) 153–172.     

Interindustry effects of productivity growth in Japan: 1960–2000

Combining conventional sectoral growth accounting and the static open input–output price model, we analyze the sources of growth of product prices in Japan during the period 1960–2000. Using the input–output framework, we take into account not only the effects of factor costs and productivity within a sector, but also their impacts outside of the sector. We find that Japan's deflation in the 1990s was characterized by low growth of wage rates, low productivity growth, and a low rate of return on capital. Until 1990, productivity improvements compensated for factor cost pressures on output price, especially the rapid growth of labor cost. In contrast, during the 1990s, decreasing rates of return on capital, not productivity improvements, canceled out the inflationary effect of wage growth. J. Japanese Int. Economies 19 (4) (2005) 568–585.     

Information technology and the Japanese economy

In this paper we compare sources of economic growth in Japan and the United States from 1975 through 2003, focusing on the role of information technology (IT). We have adjusted Japanese data to conform to US definitions in order to provide a rigorous comparison between the two economies. The adjusted data show that the share of the Japanese gross domestic product devoted to investment in computers, telecommunications equipment, and software rose sharply after 1995. The contribution of total factor productivity growth from the IT sector in Japan also increased, while the contributions of labor input and productivity growth from the non-IT sector lagged far behind the United States. Our projection of potential economic growth in Japan from for the next decade is substantially below that in the United States, mainly due to slower growth of labor input. Our projections of labor productivity growth in the two economies are much more similar. J. Japanese Int. Economies 19 (4) (2005) 460–481.     

Long-Run Relationship between Consumption and Income in Japan: Tests of the Deterministic Cointegration Restriction

This paper reexamines two versions of the permanent income hypothesis derived from R. E. Hall (1978, J. Polit. Econ.86, 971–987) and R. G. King, C. L. Plosser, J. H. Stock, and M. W. Watson (1991, Amer. Econ. Rev.81, 819–840) using Japanese quarterly data. The main focus is on the relationship between stochastic and deterministic trends of consumption and income. It is found that the deterministic cointegration restriction implied by the two models is strongly rejected in Japan in contrast to the U.S. result, and the rejection of King et al.'s model depends on the existence of a trend break. This finding suggests that the postwar Japanese economy experienced the change in a steady state path considered by the neoclassical growth model. J. Japan. Int. Econ., June 2002, 16(2) pp. 253–278. Graduate School of Economics, Hitotsubashi University, 2-1 Naka Kunitachi, Tokyo 186-8601, Japan. © 2002 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: C32, E21.     

Retesting the Learning-by-Exporting Theory: An Investigation of Chinese Manufacturers’ Productivity Under Globalization

This paper examines the learning-by-exporting effect in Chinese manufacturing firms from 2005 to 2007. The traditional view is that exporting can lead to increased productivity by facilitating access to the global market and, thus, information and cutting-edge technologies. This process has been explained by the learning-by-exporting theory, which is supported by mixed empirical evidence. A semiparametric estimation method was used to measure firm-level productivity and examine the contingent impact of exports on productivity. On the one hand, the exporting firms exhibited significantly higher productivity and faster growth than the non-exporting firms. On the other hand, the effect of exporting on productivity was dependent upon firms’ innovation behavior. Therefore, the learning-by-exporting effect is contingent on a firm’s innovation capabilities. Only sufficiently innovative firms could actually experience faster growth through exports and innovation. For non-innovative firms, exporting could even result in decreased productivity. This paper successfully reconciles the mixed findings from the existing literature and explains why both positive and negative evidence can simultaneously and reasonably exist under learning-by-exporting theory.

     

The impact of family ownership and capital structures on productivity performance of Korean manufacturing firms: Corporate governance and the “chaebol problem”

This paper examines the relationship between corporate governance and productivity performance, focusing on family ownership and capital structure. Paying particular attention to chaebols, or large business groups with entrenched family control, diversified business structure, and heavy debt-dependence, we find the positive relationship between family ownership concentration and productivity performance to be much stronger in chaebol firms than in non-chaebol firms. Moreover, high debt reliance (or low equity–asset ratio) is shown to be negatively related to productivity performance in non-chaebol firms but positively in chaebol firms. J. Japanese Int. Economies 20 (2) (2006) 209–233.     

Productivity loss and reinstatement as a legal remedy for unjust dismissal

There are two types of legal remedies for unjust dismissal, damages or reinstatement. Although workers' motivation is negatively influenced by employment adjustments such as a wage cut or layoffs, fired workers can receive a remedy when they are protected by dismissal regulations. We consider which legal remedy policy is better, damages or reinstatement, from the viewpoint of workers' motivation at workplaces. Under a reinstatement policy, firms are more likely to make an employment adjustment, and reinstatement is dominated by damages from the viewpoint of social welfare when the productivity loss caused by employment adjustment is minor. On the other hand, when the productivity loss is serious, employment adjustment is more likely made under the damages policy, and reinstatement can be desirable. J. Japanese Int. Economies 21 (1) (2007) 78–105.     

The evolution of the productivity dispersion of firms: a reevaluation of its determinants in the case of Japan

This paper contributes to the literature that empirically analyzes the evolution of productivity dispersion at the firm level and its determinants. We investigate the case of Japanese firms by using a firm-level panel dataset taken from a large-scale administrative survey for the years 1994–2003. We confirm that there was indeed an overall increase in productivity dispersion. Moreover, we find that the introduction of information and communication technologies (ICT) decreased the within-industry labor productivity dispersion, contrary to what has been found for some other countries. On the other hand, we find evidence of a significant and positive impact of internationalization on productivity dispersion.     

Population dynamics and economic growth in China

This paper focuses on two major elements of China's population dynamics—the rising proportion of workers in the population and the shift of rural workers from agriculture into industry and services—in a provincial-level analysis of per capita income and productivity growth during the last three decades. We measure the ‘mechanical’ contributions of these dynamics to per capita income as revealed by growth decompositions, before assessing the determinants of per capita income and productivity growth in a series of regressions that include the growth of the working-age to total population (WAP) ratio and a measure of sectoral employment change. Our results indicate that sectoral change has made a significant positive contribution to both per capita income growth and aggregate productivity growth, stemming from its positive impact on agricultural productivity growth—as predicted by the Lewisian dual economy model. However, the negative impact of sectoral change on productivity growth in the industrial and service sectors, combined with the negative impact of growth of the WAP ratio on both per capita income and aggregate productivity growth, suggests that the benefits of China's population dynamics during the last three decades have been overstated.     

Firm heterogeneity,foreign market entry mode and ownership choice

We study the relationship between firm productivity, foreign market entry mode and affiliate ownership choice using Kolmogorov–Smirnov stochastic dominance tests on Japanese firm-level productivity and horizontal FDI data into 20 OECD countries during the period 1985–2001. We devote particular attention to different types of joint ventures to find that affiliate ownership increases with the parent firm's TFP.     

Changes in the Sources of Modern Economic Growth: Japan Compared with the United States

The major question addressed in this paper is whether the pattern of economic growth based largely on capital accumulation preceded the pattern predominantly dependent on improvement in efficiency as measured by growth of total factor productivity. Observations on Japan extending back to the early phase of modern economic growth, together with those on the United States by Abramovitz, show that a shift from accumulation-based growth to efficiency-based growth occurred in Japan in the same manner as in U.S. economic history. This shift appears to have been associated with a change in the bias of technological progress from the use of physical capital to the use of human capital. Despite this similarity, economic growth in Japan has continued to depend more heavily on physical capital accumulation even since Japan's economy has reached a mature stage. The significant lag in shifting to efficiency-based growth seems to be characteristic of economic growth based on borrowed technology. This hypothesis is consistent with the similarity in growth patterns between Japan and newly industrializing economies in East Asia.J. Japan. Int. Econ., March 1999,13(1), pp. 1–21. School of International Politics, Economics and Business, Aoyama Gakuin University, Shibuya, Shibuya-ku, Tokyo 150-8366, Japan; and Japan Energy Research Institute, Toranomon 4-3-13, Minato-ku, Tokyo 105-0001, Japan.Copyright 1999 Academic Press.Journal of Economic LiteratureClassification Numbers: N15, O47, O57.     

CEO compensation and firm performance in Japan: Evidence from new panel data on individual CEO pay

Prior studies on Japanese executive compensation have been constrained by the lack of longitudinal data on individual CEO pay. Using unique 10-year panel data on individual CEO's salary and bonus of Japanese firms from 1986 to 1995, we present the first estimates on pay-performance relations for Japanese CEO compensation. Specifically we find consistently that Japanese CEO's cash compensation is sensitive to firm performance (especially accounting measures), and that the “semi-elasticity” of CEO's cash compensation with respect to ROA is 1.3 to 1.4, which is in general agreement with prior estimates elsewhere. As such, our estimates do not support that Japanese corporate governance is unusually defunct with regard to the significance and size of the sensitivity of CEO compensation to accounting profitability. On the other hand, to be consistent with the literature on Japanese corporate governance that tends to downplay the role of shareholders and stress the role of banks and employees, we find that stock market performance tends to play a less important role in the determination of Japanese CEO compensation. Finally, we find that the bonus system makes CEO compensation more responsive to firm performance in Japan. The finding is in contrast to the literature on compensation for regular employees in Japan which often argues that bonus is a disguised base wage. J. Japanese Int. Economies 20 (1) (2006) 1–19.