DOES OFFSHORING PAY? FIRM-LEVEL EVIDENCE FROM JAPAN.

This article explores the impact of offshoring on productivity using firm-level data for the Japanese manufacturing industries during the period 1994-2000. We find that intrafirm offshoring, that is, sourcing of intermediate inputs to foreign affiliates within a particular multinational firm, has generally a positive effect on productivity of the offshoring firm, while arm's-length offshoring, that is, sourcing to unaffiliated foreign firms, does not have such an effect. In addition, the impact of arm's-length offshoring is negative for nonmultinationals and nonexporters but nonnegative for multinationals and exporters. These results suggest that the costs of searching foreign firms suitable for offshoring are nonnegligible. ( JEL F14, L23) [ABSTRACT FROM AUTHOR]