Abstract
In this study, we investigate whether firms’ choices of offshoring modes vary according to their characteristics that are reflected in the value of Tobin's q. When a firm chooses its offshoring mode from foreign outsourcing (FO) and foreign direct investment (FDI), a model developed by Chen, Horstmann, and Markusen (2012, Canadian Journal of Economics) predicts that Tobin's q is negatively associated with the share of FO in total offshoring activities. Using detailed Japanese firm-level data, we find that Tobin's q is negatively and significantly correlated with the share of Japanese firms’ engagement in FO in the sum of FO and FDI. With regard to our empirical methodology, we employ fractional regression models, because our dependent variable (i.e., the share of FO) is bounded between zero and one. We also address the issue of endogeneity by using a simple two-step method to control endogenous explanatory variables in the fractional regression models. We show that the above finding is robust.
| Original language | English |
|---|---|
| Article number | 101044 |
| Journal | North American Journal of Economics and Finance |
| Volume | 50 |
| DOIs | |
| Publication status | Published - Nov 2019 |
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Keywords
- Foreign direct investment
- Foreign outsourcing
- Fractional regression model
- Tobin's q
ASJC Scopus subject areas
- Finance
- Economics and Econometrics
Cite this
Does a firm with higher Tobin's q prefer foreign direct investment to foreign outsourcing? / Jinji, Naoto; Zhang, Xingyuan; Haruna, Shoji.
In: North American Journal of Economics and Finance, Vol. 50, 101044, 11.2019.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Does a firm with higher Tobin's q prefer foreign direct investment to foreign outsourcing?
AU - Jinji, Naoto
AU - Zhang, Xingyuan
AU - Haruna, Shoji
PY - 2019/11
Y1 - 2019/11
N2 - In this study, we investigate whether firms’ choices of offshoring modes vary according to their characteristics that are reflected in the value of Tobin's q. When a firm chooses its offshoring mode from foreign outsourcing (FO) and foreign direct investment (FDI), a model developed by Chen, Horstmann, and Markusen (2012, Canadian Journal of Economics) predicts that Tobin's q is negatively associated with the share of FO in total offshoring activities. Using detailed Japanese firm-level data, we find that Tobin's q is negatively and significantly correlated with the share of Japanese firms’ engagement in FO in the sum of FO and FDI. With regard to our empirical methodology, we employ fractional regression models, because our dependent variable (i.e., the share of FO) is bounded between zero and one. We also address the issue of endogeneity by using a simple two-step method to control endogenous explanatory variables in the fractional regression models. We show that the above finding is robust.
AB - In this study, we investigate whether firms’ choices of offshoring modes vary according to their characteristics that are reflected in the value of Tobin's q. When a firm chooses its offshoring mode from foreign outsourcing (FO) and foreign direct investment (FDI), a model developed by Chen, Horstmann, and Markusen (2012, Canadian Journal of Economics) predicts that Tobin's q is negatively associated with the share of FO in total offshoring activities. Using detailed Japanese firm-level data, we find that Tobin's q is negatively and significantly correlated with the share of Japanese firms’ engagement in FO in the sum of FO and FDI. With regard to our empirical methodology, we employ fractional regression models, because our dependent variable (i.e., the share of FO) is bounded between zero and one. We also address the issue of endogeneity by using a simple two-step method to control endogenous explanatory variables in the fractional regression models. We show that the above finding is robust.
KW - Foreign direct investment
KW - Foreign outsourcing
KW - Fractional regression model
KW - Tobin's q
UR - http://www.scopus.com/inward/record.url?scp=85071097906&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85071097906&partnerID=8YFLogxK
U2 - 10.1016/j.najef.2019.101044
DO - 10.1016/j.najef.2019.101044
M3 - Article
AN - SCOPUS:85071097906
VL - 50
JO - North American Journal of Economics and Finance
JF - North American Journal of Economics and Finance
SN - 1062-9408
M1 - 101044
ER -