Adjusting to China competition: Evidence from Japanese plant‐product‐level data

Abstract

This study examines how the product mixes of Japanese manufacturing plants have been impacted by the rise of China imports over the period 1997-2014, and the extent that plants' local embeddedness mitigate this causal relationship. We find evidence that China import competition induced both product downsizing and product exit within Japanese manufacturing plants. Moreover, we find that those negative effects differ across plants according to various plant characteristics including the spatial organization of their parent firm. Finally, we show that both product survival and product sales are positively impacted by external agglomeration economies, but these effects are strong for standalone plants only, and almost non-existent for plants affiliated to spatially compact multi-unit firms.