Characteristics of Japanese FDI in the East and the West: Understanding the strategic motives of Japanese investment

Key determinants that distinguish the investment behavior of Japanese manufacturing companies in two general regions (East and West) and two specific countries (China and the United States) were investigated to identify the underlying global strategic motives of Japanese investment. The West was preferred by Japanese firms that belonged to competitive domestic industries and that also had aggressive foreign ownership strategies. When China and the US were compared, additional variables, such as initial entry time and an industry's resource-intensiveness were found to influence the geographic choices of Japanese firms. A marginal effect of Japanese firms' R&D activities on the selection of location was also observed. Overall, an examination of different investment behaviors has allowed us to identify the global strategic approaches of Japanese firms in the two regions. Internalization theory, a knowledge-based view, and the OLI paradigm complemented each other in explaining the geographic preferences of Japanese firms.