Abstract
This chapter presents an overview of cross-border outsourcing of Japanese manufacturing firms based on statistical data. We start from the presence of firms outsourcing production across national border , and then, compare them with firms outsourcing within the national border , as well as those sourcing from their own offshore affiliates. While we primarily focus on cross-sectional variations based on firm-level micro-data, we briefly refer to recent developments based on publicly available aggregate data.
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- 1.
Cusmano et al. (2010) similarly found that merely 7.84% of the firms in Lombardy, Italy , outsourced abroad among 1148 firms, about half of which belonged to the 10–49 employee class.
- 2.
The shares are calculated from published aggregate statistics of the MITI survey . The threshold firm size for this large/small distinction is 300 employees.
- 3.
Tomiura et al. (2013b) divided firms into five size classes (less than 100, 100–299, 300–999, 1000–2999, 3000 or more workers), and reported that the share of foreign outsourcers increases monotonically over five size classes.
- 4.
Based on the U.S. Census of Wholesale Trade in 2002, Bernard and Fort (2017) reported that more than one-third of wholesalers perform production activities if product design is included into production.
- 5.
Glodschmidt and Schmieder (2017) found that expansion of domestic outsourcing of cleaning, security, and logistics services alone can explain about 9% of the increase in wage inequality in Germany since the 1980s.
- 6.
From the gravity model of OECD exports, Tomasik (2013) found that time zone differences have a negative impact on bilateral trade flows, but the negative effect is significantly weaker for service trade . Furthermore, related to time differences, Bista and Tomasik (2017) reported that the negative effect of time zone difference is significant only on extensive margin, not intensive margin, of exports by estimating the gravity model for trade in goods of 193 countries, suggesting that time zone differences affect forming new trading relationships, rather than trading based on established relationships. Stein and Daude (2007) found that time differences have a negative impact on FDI, as monitoring affiliates overseas in remote locations, especially with wide time difference, is costly.
- 7.
This survey was conducted jointly by Japan Electronics and Information Technology Industries Association, Computer Software Association of Japan, and Japan Information Technology Service Industry Association.
- 8.
As reported in Tomiura et al. (2013b), 77 and 33% of the firms outsource to China and ASEAN, respectively, if we calculate shares in terms of the number of outsourcing firms without identifying tasks and suppliers. As some firms outsource to multiple destinations, the sum of China and ASEAN alone exceeds 100% if we calculate shares this way.
- 9.
Even if we calculate the shares in terms of the number of outsourcing firms, Tomiura et al. (2013b) confirmed that our main results are not qualitatively affected. We find that 63, 62, and 24% of the firms outsource final assembly , production of intermediates, and production of jigs/dies, respectively. As some firms outsource multiple categories of tasks, the sum of the first two percentages alone exceeds 100% in our sample.
- 10.
The outsourcing case is, exactly speaking, counted by the task-supplier-destination triplet. If the firm outsources the same category of task to two different types of suppliers in the same destination region, we count it two outsourcing cases. We discuss supplier types in Chap. 9.
- 11.
Grossman et al. (2005) theoretically considered the complementarities between offshoring and outsourcing .
- 12.
Percentages in Table 5.5 are calculated from the numbers reported in Table 1 of Tomiura (2005a).
- 13.
Although we should be cautious in directly comparing shares, Kamal et al. (2015) reported that only 5% of firms purchase contract manufacturing services (CMS ) and 57% of the firms purchasing CMS do so across national border in the case of the U.S.
- 14.
Crozet and Milet (2017) reported that, in nearly one-third of French manufacturing firms, service occupies equal or more than half of their sales. Their finding indicates that service activities has become more important even among firms categorized as manufacturers based on industrial classifications at least partly due to outsourcing .
- 15.
As a firm can source multiple tasks, the percentage is relative to the total number of choices. See Tomiura et al. (2013b).
- 16.
As explained in Chap. 4, the MITI survey includes contracting out to own subsidiaries in outsourcing , and contains no data on purchases by offshore affiliates.
- 17.
Table 3.2 in Kamal et al. (2015) reported this percentage based on BEA’s Benchmark Survey of U.S. Direct Investment Abroad at 2009.
- 18.
Table 3.8 in Kamal et al. (2015) reported these percentages by combining Company Organization Survey by Census Bureau at 2011 with Longitudinal Business Database.
- 19.
Tomiura (2007a) also reported variations across industries. The definition of domestic outsourcing is exactly the same as foreign outsourcing in the MITI survey except only for the location of suppliers.
- 20.
In the U.S. , contract work values 9.7% relative to the firms’ payroll and 5.9% to costs of materials and parts at 2007, respectively. Table 2.3 in Doherty (2015) reported these numbers based on Economic Census.
- 21.
This survey was explained in the first section of this chapter.
- 22.
Percentages are calculated from Table 12.1 in the published report of the MITI survey .
- 23.
This human capital measure is, to some extent, close to average non-production wage, though other various back-office non-production expenses are also included. We confirm the robustness of our main results with alternative measures of human capital , such as per-worker R&D expenditure or per-worker number of computers.
- 24.
Rangan and Sengul (2009) reported that ICT investment negatively relates to intra-firm trade ratio in U.S. multinationals between 1982 and 1997, but Chen and Kamal (2016) found that computer network connection is positively related in a different U.S. samples. On the effect on international trade in general, Freund and Weinhold (2004) found that the Internet, as measured by the number of web hosts, contributed to about a one percentage point increase in annual export growth from 1997 to 1999, but detected the increasing effect of distance on trade.
- 25.
Our main results are confirmed robust even if all the explanatory variables in the second-stage regression are not excluded from the first-stage selection equation.
- 26.
The dummy is defined to take the value of one if the firm has at least one foreign affiliate , and zero otherwise. The human skill H is in logarithm.
- 27.
Forslid and Okubo (2016) found that larger exporters tend to export higher share of their total sales and more than half of variations in export ratios can be explained by differences in transport costs. Our result, however, indicates that the outsourcing intensity appears not to be directed by volume-sensitive transport costs. This is plausible, as transport costs should be lower for outsourced inputs compared with exported final products.
- 28.
RIETI survey did not separate intra-firm sourcing in domestic sourcing .
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Tomiura, E. (2018). Statistical Facts about Cross-Border Outsourcing in Japan. In: Cross-Border Outsourcing and Boundaries of Japanese Firms. Advances in Japanese Business and Economics, vol 18. Springer, Singapore. https://doi.org/10.1007/978-981-13-0035-6_5
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DOI: https://doi.org/10.1007/978-981-13-0035-6_5
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