抄録
Presently, China is the largest base of overseas expansion for Japanese companies and the largest source of revenue for Japan’s foreign direct investment. In other words, the profitability of Japanese affiliates in China has a significant impact on the Japanese economy. However, in comparison to other foreign affiliates (including those from Europe, the U.S., and South Korea) and Chinese affiliates (from Hong Kong, Taiwan, and Macau), the profitability of Japanese attiliates is at a relatively lower level in China. On the basis of empirical evidence from firm-level data, my study shows what factors determining an attiliate’s profitability and suggests ways in which Japanese affiliates can improve profitability.
The main results are as follows. First, the affiliate’s total sales, the ratio of its sales in China to its total sales, and its costs (especially, of intermediate inputs) are key determinants of the profitability of a Japanese affiliate in China. Second, for these affiliates, unlike in the case of other foreign affiliates and Chinese affiliates, the ratio of sales in China has a larger positive impact on profitability for smaller-sized firms, rather than for large ones. Third, the interaction term of the ratio of sales and years of operation in China, and that of the ratio of sales and R&D activity in China contribute toward improving the profitability of Japanese affiliates. These results present
very important implications for Japanese affiliates in China.
