Title: Effect analysis of foreign direct investment in the software industry: evidence from Japanese corporate financial data

Authors: Toshiyuki Nakanishi

Addresses: Institute of Pacific United New Zealand, 57 Aokautere Drive, Fitzherbert, Palmerston North 4472, New Zealand

Abstract: The influence of foreign direct investment (FDI) on the output and productivity of software companies was analysed using corporate financial data of Japanese software companies. The analysis was done on the basis that FDI improves productivity through more effective development, and increases output through market expansion. To solve the endogeneity of self-selection, whereby enterprises with higher productivity and output are more likely to engage in FDI to increase their productivity and output, propensity score analysis was used. As a result, it was recognised that FDI significantly improved output growth rate, but did not necessarily improve productivity growth rate. This result likely derives from the difficulties faced by Japanese software companies in developing and managing foreign country branches.

Keywords: software company; management; foreign direct investment; FDI; corporate financial data; offshore development; propensity score matching; PSM; productivity; total factor of productivity; TFP; output; Japan.

DOI: 10.1504/GBER.2018.10004180

Global Business and Economics Review, 2017 Vol.19 No.6, pp.771 - 790

Received: 25 Jan 2016
Accepted: 04 Apr 2016

Published online: 12 Oct 2017 *

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