A subnational analysis of Japanese direct investment in Canada

This study examines longitudinal aspects of Japanese foreign direct investment in Canada. In looking at the longitudinal aspects, the focus was on a descriptive analysis of entry and exit rates and on an econometric analysis of the determinants of subsidiary survival and exit. In these analyses, we find that exit rates are related to subsidiary-level variables such as business size, expatriate employment levels, equity-ownership levels, and entry mode. The sector and region in which the investments are made is also related to subsidiary survival, with manufacturing-sector subsidiaries located in Ontario being the least likely to exit. The results of our study suggest that region and industry interact both to draw investment to a region and to influence the likelihood of survival of foreign-owned businesses. Furthermore, the focus an regional issues for Canada shows that even within a small open economy subnational (interprovincial) variance can have important effects on the characteristics and performance of foreign direct investment.