2013 Volume 46 Issue 5 Pages 1-28
This paper uses the framework of companies' international division of labour to explore the possibility that shifting to overseas production can stimulate domestic transformational activities in Japanese companies. ‘Domestic transformational activities' refers to the processes whereby domestic businesses convert excess resources, realised from the transfer of production overseas, into new products, processes or businesses. Until now, in viewing the relationship between a company's overseas production activities and its domestic production and employment, it has been considered that overseas production decreases domestic production and employment. This paper highlights the one－dimensional nature of this ‘hollowing－out' theory. It puts forward the hypothesis that shifting to overseas production may stimulate ‘induced transformational activities' resulting from the expansion of exports of intermediate goods, as well as ‘voluntary transformational activities' for new products and businesses. Quantitative and qualitative analyses are then performed to verify this hypothesis. The results reveal the following : 1) the transfer to overseas production triggers induced transformational activities ; 2) the likelihood of such a transfer leading to voluntary transformational activities is affected by the degree of accumulated or developed technological slack in a company, as well as its organisational leadership and coordinating ability ; and 3) restrictions on a company's ability to lay off its workforce at will through employee unions and intrinsic employee motivation create organisational commitment, which supports overall transformational activities.