DPRIETI Discussion Paper Series 16-E-015

Transplanting Corporate Culture across International Borders:
FDI and female employment in Japan

KODAMA Naomi
RIETI

Beata S. JAVORCIK
University of Oxford

ABE Yukiko
Hokkaido University

The Research Institute of Economy, Trade and Industry

http://www.rieti.go.jp/en/

RIETI Discussion Paper Series 16-E-015
February 2016

Transplanting Corporate Culture across International Borders:
FDI and female employment in Japan♦
KODAMA Naomi
Hitotsubashi University and RIETI
Beata S. JAVORCIK
University of Oxford and CEPR
andABE Yukiko
Hokkaido University
Abstract
This paper examines the effect of foreign ownership on gender-related employmentoutcomes and work practices in Japan. The data indicate that the proportion of females
among workers, managers, directors, and board members is higher, and the gender wage
gap is smaller, in foreign affiliates than in domestic firms of comparable size operating inthe same industry. Foreign affiliates are also more likely to offer flexible working
arrangements, telecommuting, and child care subsidies. These effects are mostly visible
in older affiliates and are more pronounced in affiliates with a larger foreign ownershipshare. These patterns are in line with the view that it takes time to transplant corporate
culture to an overseas affiliate and that a higher ownership stake may facilitate thisprocess.

Keywords: FDI, MNEs, Corporate culture, Gender gap
JEL classification: F16, F66, J71
RIETI Discussion Papers Series aims at widely disseminating research results in the form ofprofessional papers, thereby stimulating lively discussion. The views expressed in the papers
are solely those of the author(s), and neither represent those of the organization to which theauthor(s) belong(s) nor the Research Institute of Economy, Trade and Industry.

♦

We are grateful to seminar participants at the Research Institute of Economy, Trade, and Industry (RIETI),
the University of Technology Sydney and the Australian National University (Crawford School) for theircomments and suggestions. This study is conducted as a part of the Project “Effect of diversity on economic
growth and business competitiveness” undertaken at RIETI. We are also supported by the Joint Usage andResearch Center, the Institute of Economic Research, Hitotsubashi University and JSPS-Kakenhi grant (grant
numbers: 26590045 and 15H03358). We thank the Statistics Bureau of the Ministry of Internal Affairs andCommunications, the Ministry of Health, Labor, and Welfare, and the Ministry of Economy, Trade, andIndustry for granting us the micro data access. The views expressed in this paper are solely those of the authorsand do not necessarily reflect the views of the organizations with which the authors are affiliated.
Corresponding author: Beata S. Javorcik, Department of Economics, University of Oxford, OX1 3UQ, United
Kingdom. beata.javorcik@economics.ox.ac.uk.
1I.

Introduction

In ancient times, foreign newcomers sometimes accepted the gender norms prevailing intheir destination and sometimes replaced them with their own.1 The same could be said
about modern times: in the 1980s and early 1990s, it was thought that foreign pressure
was one of the few effective forces for advancing the women's status in the Japanesesociety.2 More recent commentaries point to foreign direct investment (FDI) as a catalyst
for change, suggesting that Japanese women are more likely to have opportunities for
professional advancement in foreign affiliates operating in Japan than in Japanesefirms.3 This matters because creating opportunities for professional advancement for
disadvantaged groups, which before were not fully able to purse their comparativeadvantage, improves the allocation of talent and translates into a faster economic growth(Hsieh et al. 2013).
The aim of this paper is to document one channel through which globalization
affects the gender norms and labor allocations. More specifically, we examine the effect offoreign ownership on gender-related employment outcomes and work practices in Japan.
We compare female employment (at various levels) in foreign affiliates and domestic
firms operating in Japan. We also consider differences in the self-reported work practices
and some aspects of corporate culture such as offering flexible working arrangements,
telecommuting, job sharing, child care subsidies and the average share of vacation days
used by employees, all of which are likely to make employment attractive to female

Graves (1960) describes how different waves of migrants to Greece had a different effecton the societal gender norms. For instance, he claims that the Ionians and Aeolians, thefirst two waves of patriarchal Hellenes to invade Greece, accepted the matrilineal
customs prevailing in Greece. Only later the arrival of Achaeans and Dorians succeededin establishing patriarchal rule and patrilinear inheritance.
2 For example, when the Equal Employment Opportunity Act for men and women was
passed in 1985, it was suggested that international pressure, especially the ratification of
the UN Convention concerning the Elimination of All Forms of Discrimination against
Women, was the major force behind passing this law (Parkinson 1989).
3 See, for example, The Economist Briefing “Japanese women and work” March 29, 2014
2
1

workers.
Japan is an interesting setting for our study for three reasons. First, genderinequality is greater in Japan than in other developed countries, suggesting that there
are ample opportunities for foreign affiliates to bring changes in this dimension.
According to the World Economic Forum, Japan ranked 104 among 142 countries interms of the Gender Gap Index in 2014. Japan is also at the bottom of the Glass CeilingIndex compiled by The Economist magazine, ranking 26th among 27 countries considered.
While Nordic countries attain a score of 80 percent, the index value for Japan reaches
only 20 percent. Moreover, the gender wage gap is much larger in Japan than in otherdeveloped countries (Blau et al. 2014).
Second, most FDI inflows into Japan come from countries that are moregender-equal than Japan is. This can be seen in Figure 1 which plots the Gender Gap
Index against the number of foreign affiliates operating in Japan, with the index value
attained by Japan shown with the horizontal line. Thus it is likely that foreign investors
bring gender norms that are different from the existing norms in Japan.
Third, a lot of anecdotal evidence suggests that Japanese women are likely tohave greater career opportunities in foreign affiliates operating in Japan than inJapanese firms. For instance, the female manager ratio in Texas Instruments Japan Ltd.
was 10 percent in 1995, and the company set a target of raising it to 15 percent by 1999
(Taniguchi 2008).4 IBM Japan has made serious effort to utilize female talents as a
crucial part of their corporate strategy: in 1999 it announced its intent for the number offemale managers to quadruple to 700 by 2003. Nissan Motor Co. employed only 5 female
managers before the acquisition by Renault in 1998, 36 in 2004 but this number
increased to 101 in 2007, and the proportion of female managers in design, planning, andThe average ratio of female managers in Japan was only 2 percent in 1989 and 8
percent in 2012 (White Paper of Gender Equality, the Cabinet Office of Japan). Among
publically traded companies it was even smaller reaching 3.6 percent in 2012.
3
4

product development doubled.5
Our analysis is based on three datasets that allow us to capture gender outcomesand management practices in foreign and domestic firms in Japan from the 1990s to thepresent. Our first dataset comes from the Corporate Social Responsibility (CSR) survey,
which covers all listed companies, including about 1000 firms per year from 2004 to 2014.
The second dataset combines the Basic Survey of Wage Structure (BSWS) and the Basic
Survey of Japanese Business Structure and Activities (BSJBSA). This is a linked
employer-employee dataset that contains individual worker data. The final dataset is
obtained by combining the Establishment and Enterprise Census (EEC) and BSJBSA.
This dataset allows us to examine the causal effect of foreign acquisition on gender
outcomes in the firm. The last two datasets include small firms that are not covered in
the first dataset.
Our first set of the results, based on the CSR data set covering publicly tradedfirms, suggest that foreign affiliates are more gender-equal than Japanese firms are. We
find that the proportion of females among workers, managers, directors, and board
members is higher in foreign affiliates than in domestic firms of comparable size
operating in the same industry in the same year. Foreign affiliates are more likely to offer
flexible working arrangements, such as flexible working hours or telecommuting. They
are also more likely to offer child care facilities or child care subsidies. Moreover, theiremployees take on average a larger proportion of their vacation allowance. These
differences are present for the most part only in foreign affiliates that have been in
operation for more than three years, suggesting that it takes time to transplant a
corporate culture across international borders. The difference is also more pronounced inaffiliates with a higher foreign ownership share suggesting that control is essential for
This increase took place slightly after the acquisition of Nissan by Renault: theRenault-Nissan alliance started in 1999, and Renault's shareholding increased from 36.8
percent to 44.4 percent in 2002.
45

ability of the foreign parent to affect the corporate culture in the overseas affiliate.
Our second exercise is based on the matched employer-employee data. Its main
finding is that the gender wage gap (after controlling for worker characteristics such as
education and age) is smaller in foreign affiliates than in Japanese firms. The genderwage gap appears to be smaller in older affiliates and in affiliates with a larger foreign
ownership share, echoing our earlier findings.
In our final exercise, we examine whether there is a causal link between foreignacquisitions and gender outcomes. We conduct an analysis that combines propensity scorematching with a difference-in-differences approach and find that foreign acquisitions leadto a 6-7 percentage point increase in the share of female workers in the third period under
foreign ownership. However, they do not appear to have an impact on female
representation at the board level within the timeframe considered. Both findings are
consistent with the results based on the CRS data.
Together, all of these results suggest that inflows of FDI affect gender-related
labor market outcomes in Japan. Given that innate ability is unlikely to differ between
men and women and that women have been historically disadvantaged in the Japaneselabor market, our results suggest FDI has the potential to improve the allocation of talentand in this way contribute to faster economic growth.6
Our paper is related to three strands of the economic literature. The first strand
examines the impact of globalization (and more specifically, international trade) on
gender outcomes. In an early study, Black and Brainard (2004) use industry-level data forthe period 1977-94 to show that increased import competition reduces the gender wage
gap in the more concentrated industries in the United States. Juhn, Ujhelyi, andVillegas-Sanchez (2012) argues that tariff reductions under the North American Free
FDI can also contribute to economic growth through other channels, such as technology
transfer and impact on innovation, but these channels are not of immediate interest in
this study.
5
6

Trade Agreement (NAFTA) prompted Mexican establishments to adopt modern
technologies that require less physical strength resulting in an increase in the number offemale blue-collar workers and their wages, but not the number and wages of white collar
workers.7 Boler et al. (2014) show that exporting firms in Norway differ in term of thegender wage gap from non-exporters. Once unobservable worker heterogeneity is taken
into account, the gender wage gap appears to be higher in exporting firms than in
non-exporters, but this effect is present only among workers with college education.
The second strand of the related literature documents the impact of foreign
ownership on various aspects of plant performance. Arnold and Javorcik (2009) show that
foreign acquisitions of Indonesian plants lead to a 13.5 percent productivity boost after
three years under foreign ownership. The rise in productivity is a result of restructuring,as acquired plants increased investment outlays, employment and wages. Foreign
ownership also enhances the integration of acquired plants into the global economy
through increased exports and imports. Similarly, Guadalupe et al. (2012) show that in
Spain foreign acquisitions result in more product and process innovation and adoption offoreign technologies, also leading to higher productivity.
The final strand of the literature related to this study documents the differences
in management practices across firms and countries. Bertrand and Schoar (2003) showthat manager fixed effects matter for a wide range of corporate decisions. A large portionof the heterogeneity in investment, financial, and organizational practices of firms can be
explained by manager fixed effects. Management practices display significant
cross-country differences and are strongly correlated with firm productivity (Bloom and
Van Reenen 2007). Multinational firms appear to transplant their management practices
to host countries. For instance, while there is a wide dispersion in management scores
Kazekami and Endoh (2012) estimate labor demand elasticity using Japanese data, andarrive at mixed conclusions concerning the effect of trade on labor demand elasticity offemale and male workers.
6
7

across countries, the subsidiaries of foreign multinationals score highly regardless of
their location. Multinationals also transplant other features of their organizational form
overseas, such as the average degree of decentralization (Bloom, Sadun, and Van Reenen2012).8,9
Our study makes three contributions to the existing body of knowledge. First, we
contribute to the labor literature focusing on gender issues by investigating how anotheraspect of globalization, namely FDI, influences the gender-related labor market outcomes.
Second, we contribute to the literature documenting the impact of FDI on the recipient
plants by examining outcomes that the previous studies were unable to explore. And
third, we contribute to the literature on management practices by examining how theforeign affiliates age and the extent of foreign control affect the process of transplanting
corporate culture across countries.
The paper is organized as follows. In the next section, we describe the data.
Section 3 reports the regression results on various gender outcomes. In Section 4, theresults from our matching exercise are presented. The last section presents conclusions of
the study.

II. Data and Definitions
Data
Our analysis relies on three distinct data sets, which are described below.

CSR data (Dataset 1). The Corporate Social Responsibility survey is conducted by aExpatriate staff plays an important role in transplanting management practices acrossinternational borders. Marin et al. (2014) mention that 43% of eastern European
affiliates of German and Austrian multinationals had at least one manager sent from theheadquarters. The average number of expatriate managers per affiliate was 2.63.
9 Detailed case studies of the Philippines, Dominican Republic, and Costa Rica suggestthat FDI can create favorable institutional externalities for workers, both at the national
level and within export processing zones or industrial parks. This externalities stem fromforeign affiliates introducing different management practices and labor relations (formore details see Moran (2002)).
7
8

private publishing company Toyo Keizai among all the listed companies and a subset oflarge non-listed companies.10 It covers about 1000 firms per year and is available for theperiod 2004-14 (with the exception of 2005). The survey includes questions about the
number of employees by gender, the number of managers by gender, whether the firm has
introduced a flextime system, whether the firm allows its employees to have temporary
part-time work arrangements, whether the firm offers an option of telecommuting to its
employees, whether the firm offers child care facilities or subsidies for child care, andwhat share of vacation days is utilized on average by firm employees. In order to identify
foreign affiliates we merge the CSR data with the information on foreign capital sharesavailable from the Development Bank of Japan (DBJ). As the DBJ data cover only
publically traded firms, we lose all non-traded firms from the sample. The merged dataset
contains between 5,000 and 7,000 firm-year observations depending on the outcome
considered.

BSWS & BSJBSA (Dataset 2). We combine data from two sources: the Basic Survey on
Wage Structure (BSWS) and the Basic Survey of Japanese Business Structure andActivities (BSJBSA). The BSWS is the most comprehensive wage survey in Japan,
conducted every year by the Ministry of Health, Labour and Welfare. It covers
establishments of private and public sector firms with 10 or more employees, and private
sector establishments with 5 to 9 employees. The establishments in the sample are
randomly drawn from the population of firms in proportion to the size of prefectures,industries, and the number of employees.11 The sampling of the survey is done in two
steps: in the first step, a random sample of establishments is selected, and in the second
step, the selected establishments are asked to take a random sample of workers and

1011

The CSR dataset was provided by RIETI.
Prefecture and industry size are measured in terms of employment.
8

provide information on their payroll records. The BSWS excludes agriculture, forestry,
fishery and public services. The data contain information on an individual worker’s
monthly salary in June, annual bonuses, hours worked, gender, age, tenure, education,
job title, and the type of a job. The data include approximately 1.2 million workers per
year coming from 70,000 establishments. Our wage variable is calculated by dividing thetotal amount of remuneration by the total hours worked.
The BSJBSA survey is conducted among approximately 30,000 firms operating in
manufacturing, commerce, and a subset of services industries, which have 50 or more
employees and the value of capital of at least 30 million yen.12 The BSJBSA data contain
information on the foreign ownership, sales, total number of employees, debt/asset ratio,
and R&D/sales ratio. The BSWS and BSJBWA are merged using the company name,address, and the phone number. The dataset used in this study consist of 60,239
firm-year observations pertaining to 16,692 firms and 2,708,061 employees. We use thisdataset to study differences in the gender wage gap of domestic and foreign firms. The
actual number of observations used in the analysis is smaller due to missing values ofcontrol variables.

EEC & BSJBSA (Dataset 3). To create our third dataset we combine information fromtwo sources: the EEC and BSJBSA. The EEC is the census that covers all establishments
in Japan and is conducted twice in every five year period by the Ministry of Internal
Affairs and Communications. We use years 1996, 2001, 2004, 2006, and 2009. The EEC
data contain annual information on the number of employees and board member bygender in all establishments operating in Japan. The EEC and the BSJBSA are merged

The BSJBSA survey is conducted by the Ministry of Economy, Trade, and Industry.
Finance and real estate sectors are not included in the survey. Since BSJBSA is a surveyof private sector firms, non-profit service sector organizations (e.g., hospitals and schools)
are not included either.
912

using the company name, address, and the phone number. The dataset we use in thisanalysis contains 52,616 firm-year observations.

Definition of foreign ownership
We define a foreign affiliate dummy (Foreign affiliate) as 1 for a firm with a foreign equity
share of at least ten percent, and zero otherwise. We clean the data to correct for whatmost likely are coding errors.

A sequence of Foreign affiliate values observed for thesame firm over four consecutive years equal to 0010 and 0100 is replaced with 0000.
Analogously 1101 and 1011 become 1111. Missing values (denoted as .) due to the firm not
be present in the data set in a given year are replaced with the ownership status in theadjacent years (e.g., 0.0 becomes 000, 1.1 becomes 111, 0..0 becomes 0000, and 1..1
becomes 1111). The missing year adjustment matters only for calculating the age of theforeign affiliate.
We define New foreign affiliates as those that are in their first, second or thirdyear of operation under foreign ownership. Old foreign affiliates are defined as those thathave been operating under foreign ownership for more than three years. Majority owned

affiliates are defined as those with the foreign ownership share above 50 percent.
Blocking interest is defined as foreign ownership share of at least 25 percent but no morethan 50 percent. Foreign affiliates with the foreign ownership share of less than 25
percent (but at least 10 percent) are considered to be Minority foreign owned.

Summary statistics
As shown in Table 1, the number of foreign affiliates operating Japan increased overtime: the share of foreign affiliates among listed firms went up from 38 percent in 2004 to
54 percent in 2014. The number of new affiliates declined significantly during thefinancial crisis, though it started to recover in the most recent years. According to Table 2,10most affiliates in our sample involve minority shareholding by foreign owners. There is
only a handful of majority-owned foreign affiliates.

III. Estimation Results
Female employment:

Baseline estimates from the CSR data

Using Dataset 1 (CSR data), we examine whether foreign affiliates differ from Japanesefirms operating in the same industry in terms of gender-related outcomes. We distinguishbetween new and established (old) foreign affiliates as transplanting the corporate
culture across international borders is likely to take time. The former are defined as thosein their first three years of operation, while the latter definition encompasses theremaining affiliates. In order to distinguish the effect of size from the effect of“foreigness”, we control for the firm size measured using the number of employees(logged).
The first set of dependent variables consists of the proportion of women in thefirm’s workforce and in the following managerial positions: (1) managers, (2) directors,and (3) board members. As different industries may have a different appeal to women, we
control for industry-year fixed effects. The second set of outcome variables takes the formof indicator variables equal to one if at least one female holds a given position, and zerootherwise. When we use the second set of outcomes, we estimate a logit model which ismore appropriate for indicator variables. Again we control for industry-year fixed effects.
The summary statistics are presented in Table 2. One striking difference
emerging from this table is between domestic firms and majority foreign-owned affiliates.
The latter have a higher share of female employees (23 percent versus 20 percent inJapanese firms), female managers (6.8 versus 3.8 percent), female directors (2.9 versus
1.7 percent) and female board members (3.1 versus 1.1 percent). There are also
pronounced differences between Japanese firms and all foreign affiliates in terms of11human resource practices. The latter group is much more likely to offer flexible work time
(73 percent of old foreign affiliates do so as compared to 40 percent of Japanese firms),
telecommuting arrangements (18 versus 4.3 percent), child care or child care subsidies(32 versus 6.2 percent). Employee of old foreign affiliates use on average 56 percent of
their annual leave allocation, while the corresponding figure for Japanese firms is only 44
percent. Some of these differences could be due to different industry affiliations in the twogroups of firms, which we take into account in our regression analysis, to which we turnnext.
The regression results based on the first set of variables, shown in the top panelof Table 3, suggest that established (old) foreign affiliates indeed hire and promote more
women than do other firms of similar size operating in the same industry. The results are
statistically significant in all regressions (at the 1 percent level in three of four
specifications). The estimates are also economically meaningful. For example, the resultsfrom column (1) suggest that the proportion of women in the firm’s workforce is on
average 2 percentage points higher in established foreign affiliates than in Japanesefirms. For managers, the corresponding figure is 1.6 percent, which is meaningful giventhat the average ratio of female managers in Japanese companies in our dataset is only
3.5 percent. Established affiliates have almost a fifty percent higher share of female
directors and board members than Japanese firms do, though it is also true that the ratioof women in these positions is very low in domestic establishments.13 The estimatedeffects for new foreign affiliates are much smaller in magnitude and do not reach theconventional significance levels, with the exception of the share of females in total
workforce.
Moving on to our control variable, we find that the fractions of women in the
Siegel et al. (2013) show greater representation of females in managerial and executiveroles translates into improved firm-level outcomes in Japan.
12
13

workforce and in managerial positions are lower in large firms, as the significant
coefficients on the total firm employment suggest. Large firms appear to be moremale-dominated than smaller firms are.
The lower panel of Table 3 reports the results from regressions where thedependent variable is an indicator capturing the presence of women in managerial
positions. The basic pattern is very similar to that found in the top panel. Controlling fora firm’s employment, industry–year fixed effects, we find that, relative to Japanese firms,
established foreign affiliates are more likely to have at least one female manager, director,
and board member. New foreign affiliates exhibit this pattern only in the case of female
managers.
Overall, we find support for the view that foreign affiliates hire and promote
more women than do domestic firms. Our results also suggest that implementing themore female-friendly hiring and promotion practices takes time.

Does the extent of foreign control matter?
So far we have established that foreign affiliates hire and promote more womenand that implementing these policies takes time. Next, we examine whether the extent offoreign ownership plays a role. We do so by allowing for a differential effect for majority
owned affiliates (i.e., those foreign ownership share above 50 percent), affiliates where
foreign owners have a blocking interest (foreign ownership share between 25 and 50
percent), and minority owned affiliates (with foreign share exceeding 10 percent but
being below 25 percent). As before, we keep the distinction between old and new affiliates.
Two patterns are clearly visible in the results for female shares presented inTable 4a. First, the more gender-equal employment outcomes are driven almost
exclusively by established affiliates. And second, there is a monotonic relationshipbetween the share of females at various levels and the extent of foreign ownership. These13

conclusions are broadly confirmed when we consider outcomes captured by indicatorvariables in Table 4b.
In sum, we conclude that both the age of the affiliate and the extent of foreign
ownership matter when it comes to transplanting the corporate culture to an affiliateabroad.

Management practices
We would expect that more balanced gender-related outcomes should go hand inhand with more flexible working arrangements which women tend to find attractive. The
CSR survey asks firms about their human resource practices, and their responses areused as dependent variables. We consider the following human resource practices: (1)flexible working hours (flextime); (2) the option to temporarily reduce one’s employment
to a part-time position (short-time); (3) telecommuting arrangements; (4) the employer
offering child care facilities or child care subsidies; and (5) the average share of vacation
days used by workers. The first four variables are indicator variables, while the last one
is continuous. Thus we employ a logit model in the first four specifications and OLS in thelast specification. We control industry-year fixed effects.
Table 5 reports the results from regressions on human resource practices. The
sample sizes are smaller than those in Table 4 because questions related to work
practices were not asked in all waves of the CRS survey. In all regressions in the top
panel of Table 5, the estimates imply that established foreign affiliates are more likely
than Japanese firms are to offer flexible working arrangements. Their employees also
tend to take a larger portion of the annual leave allocation. Interestingly, both new andold foreign affiliates are more likely to offer child care facilities or child care subsidies
when compared to Japanese firms. This finding is intuitive as establishing child carefacilities or offering child care subsidies can be accomplished through a central decision14and does not require behavioural changes on the part of the workforce.
In the lower panel of Table 5, we additionally distinguish between affiliates withdifferent degrees of foreign control. As before, we confirm that the differences between
Japanese and foreign firms are driven by old foreign affiliates and that the degree of
foreign control is positively correlated with the introduction of the practices studied(though the pattern does not hold for Flextime).14

Gender wage gap: Wage regressions based on Dataset 2
So far, we have shown that foreign affiliates in Japan (particularly the moreestablished ones and those with a greater share of foreign ownership) have a higher shareof women in their workforce and management and are also more likely to follow modern
and women-friendly human resource policies.
Now we turn to the question: Is the pay difference between men and womensmaller in foreign affiliates than in domestic firms? If indeed foreign affiliates follow moregender-balanced human resource policies, this should also be manifested in the lower
gender wage gap.
To examine this issue, we estimate a Mincerian wage regression using thematched BSWS-BSJBSA data (Dataset 2). The dependent variable is the hourly wage ofworker i employed in firm j in year t. We control for the worker’s age (to capture thepotential worker experience) and age squared.15 We also include indicator variables forfour levels of education (9 years, 12 years, 14 years, 16 years or more, setting the 12 years
as the base group).
Our primary interest here is in the coefficients on the female dummy (capturing
the gender wage gap, that is, the pay differential between men and women that is not
We have very few observations on majority-owned new affiliates we are unable toseparately estimate a coefficient on this variable.
15 Controlling for tenure and tenure squared, in addition to age and age squared, leads tovery similar results.
15
14

explained by workers’ characteristics) and its interaction with indicator variables for theworker being employed in a foreign affiliate. We expect a negative coefficient on thefemale dummy (since women are paid less than men), and a positive coefficient on theinteraction term which would suggest that the gender wage gap is smaller in foreign
affiliates. We distinguish between new and old foreign affiliates as well as between
affiliates which are majority foreign owned, minority foreign owned, and those where theforeign owner has a blocking interest. We expect to see larger effects for older affiliates
and for affiliates with a large foreign ownership share in accordance with our earlier
findings.
Again to make sure that we pick up the effect of foreign ownership rather thanthe effect of the firm’s size, we control for the log of lagged employment in the firm and its
interaction with a dummy for female. The latter will capture any systematic relationshipbetween the firm’s size and the gender wage gap. The specification also includes, industry,
region and year fixed effects. The standard errors are clustered at the firm level. The
regressions are weighted by the person weight in the BSWS, the weight that reflects thesurvey sampling of workers.
The results, reported in Table 6, echo the central message of our study as theysuggest that foreign affiliates are more gender equal. Starting with the results in column
1, we find that the gender gap in domestic firms is equal to 33 percent.16 In other words,
Japanese women earn on average 33 percent less than equally qualified men of the sameage employed in the same industry in a firm operating in the same region. Moreinterestingly from our perspective, the gender wage gap goes down by three percentage
points to 30 percent in older foreign affiliates.17 While the magnitude of the effect is not

1 - exp(-.396) = 0.33
One explanation for higher wages in foreign affiliates than in domestic firms is thatunobserved human capital in foreign affiliates is higher than in domestic firms. Anotheris compensating wage differentials due to the fact that jobs are less secure in foreign
16
16
17

huge, the estimate is significant in statistical terms. New foreign affiliates do not appear
to be different from Japanese firms.
In line with the existing studies (see Javorcik (2015) for a literature review), we
find that foreign affiliates tend to pay higher wages to all workers. The foreign affiliate
premium reaches 6 percent in established affiliates and 3.5 percent in new affiliates.
Finally, we find that larger firms tend to have a lower gender wage gap (this result is notshown to save space).
In column (2), we investigate differences in the gender wage gap between
affiliates with different foreign ownership shares (while allowing for a differential effectfor old and new affiliates and large firms). We find that majority owned foreign affiliates
have a lower gender wage gap. This effect is statistically significant (at the one percent
level) and economically meaningful. Working for a majority owned foreign affiliate closes
the gender wage gap from 33 to 25 percent. Consistent with the evidence from othercountries, we also find that foreign affiliates pay higher wages to all workers. The effect islarger for older affiliates and increasing with the foreign ownership share.
Finally, in column (3), we distinguish between affiliates of different ages and withdifferent ownership share. The gender wage gap appears to be the lowest among theestablished majority owned affiliates, which is in line with the results from the first twocolumns.
While the results are consistent with the picture painted by our first dataset,they should be interpreted with caution as our data do not allow us to account for the
possibility of workers with different unobservable characteristics self-selecting into
working for foreign affiliates.18

affiliates than in Japanese firms.
18 Our dataset has the form of repeated cross sections which make it impossible to trace
workers over time.
17

IV.

Foreign acquisitions and gender-related outcomesIn our final exercise, we explore the causal link between foreign ownership andgender-related outcomes. More specifically, we focus foreign acquisitions and ask whether
the ownership change from domestic to foreign resulted in changes in gender-related
outcomes. As Japanese establishments acquired by foreign owners are not a random
sample of firms, we address the selection bias through propensity score matchingcombined with a difference-in-differences approach (as was done by Arnold and Javorcik(2009)). Propensity score allows us to create the missing counterfactual of how theacquired firm would have performed in the absence of ownership change, while thedifference-in-differences approach allows us to take into account unobservable firm
heterogeneity.
Our exercise is based on Dataset 3. The estimates from the logit model predicting
the probability of a future foreign acquisition (which is the propensity score in our
analysis), indicate that larger, more R&D intensive and less indebted firms are more
likely to be attractive to foreign investors (see Table 7). The higher fraction of women in
the workforce increases the likelihood of a future foreign acquisition, although this effectis smaller for large firms. Having a female board member decreases the probability of
being acquired.19 The estimated propensity score satisfies the balancing property.
We employ kernel matching, in which multiple control observations are used andthe weight given to each is determined by the distance in the propensity score from thetreated (acquired) firm.20 We consider three outcomes: (1) the share of female workers, (2)a dummy for the firm having at least one female board member, and (3) the total

This estimation assumes that the treated and the control groups share the common
trends in the pre-acquisition period.
20 In other words, kernel matching uses weighted averages of all firms in the control
group (within the common support) to construct the counterfactual outcome. Higher
weight is given to controls whose propensity score is closer to that of the treatedobservation, while a lower weight is given to more distant controls.
18
19

employment.21
The estimates, presented in Table 8, indicate that foreign acquisitions boost
employment as well as the share of women among workers. The effect on employment (a 4
percent increase) is visible already in the year of ownership change. By the time weobserve the firm for the third time under foreign ownership, the magnitude of the effectmore than doubles. The increase in the share of female employees is statisticallysignificant only in the last column. Relative to the control group (firms remaining inJapanese hands), the acquired firms see an increase in female employment share by 6.6
percentage points.
In the bottom panel of the table, we restrict our attention to firms that we
observe in the pre-acquisition survey, in the survey year of the ownership change and thenext two surveys after the acquisition. Thus comparisons across columns are made on
exactly the same sample of firms, which unfortunately lowers the sample size to between
151 and 177 acquisition cases depending on the outcome of interest. The message
remains unchanged. The acquired firm experience an increase in both employment andthe share of females in their workforce.
In neither of the panels, do we find an effect on the female representation at theboard level, which is consistent with the findings based on Dataset 1 suggesting that only
old affiliates differ from Japanese firms in terms of female participation in the board(recall Table 3).
In summary, we find that foreign acquisitions lead to employment growth and anincrease in the female share of workers, but have no impact on the likelihood of having afemale board member.

Although total employment is not a gender-related outcome, it is easier to change thecomposition of the firm’s workforce through growth than through downsizing.
19
21

V.

Conclusions
Globalization influences countries not only by bringing foreign goods and foreign

capital but also by exposing them to foreign cultural norms. These foreign cultural norms
are likely to manifest themselves in the corporate culture transplanted by foreign
investors from their headquarters to their affiliates operating in host countries.
In this paper, we study how transplanting foreign cultural norms affects
gender-related labor market outcomes and human resource practices in Japan. Morespecifically, we use multiple data sources to examine whether female representation in
the workforce and human resource practices are related to foreign ownership. We focus on
Japan because it exhibits very different attitudes toward female employment than domost countries from which it receives inflows of foreign direct investment.
We find that foreign affiliates are more gender-equal than Japanese firms are,but this difference, while meaningful, is not dramatic. This suggests that foreign
investors bring their home country attitudes to overseas investments but they also adjust
them to the local culture. The higher representation of women in foreign affiliates goes
hand in hand with flexible and family-friendly human resource practices, such as
telecommuting and child care subsidies.
The difference in gender-related outcomes is driven mostly by older foreign
affiliates and by affiliates where the foreign parent has a greater degree of control. These
patterns suggest that transplanting corporate culture abroad takes time and is facilitatedby having greater control over operations.
Our results suggest that by contributing to improved allocation of talent thecultural changes brought about by FDI inflows are likely to make a positive contribution
to economic growth.

20References
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Bertrand, M., Schoar, A., 2003. Managing with Style: The Effect of Managers on Firm
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Blau, F.D., Ferber, M.A., Winkler, A.E., 2014. The Economics of Women, Men, and Work
(7th ed.). Pearson, Prentice Hall.
Bloom, N., Sadun, R., Van Reenen, J., 2012. The Organization of Firms across Countries.
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Boler, E.A., Javorcik, B.S., Helene Ultveit-Moe, K., 2014. Globalization: A Woman's Best
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Research Observer, 30(1): 74-94
Juhn, C., Ujhelyi, G., Villegas-Sanchez, C., 2014. Men, Women, and Machines: How Trade
Impacts Gender Inequality. Journal of Development Economics 106, 179-193
Kazekami, S., Endoh, M., 2012. Difference effects of trade by type of employment, gender,
age and education: Evidence from matched employer-employee data in Japan.
Chukyo University Discussion paper
Marin, D., Schymik, J., Tarasov, A., 2014. Trade in Tasks and the Organizationi of Firms.
University of Munich, mimeo
Parkinson, L., 1989. Japan's Equal Employment Opportunity Law: An

Alternative

Approach to Social Change. Columbia Law Review 89, 604-661
Siegel, Jordan, Naomi Kodama, and Hanna Halaburda, 2013. The Unfairness Trap: A
Key Missing Factor in the Economic Theory of Discrimination, Harvard Business
School Working Paper 13-082.

21

Figure 1. Gender Gap Index and the number of foreign affiliates.85

Gender Gap index & the no. of foreign affiliates.8

SwedenSwitzerland
Netherlands Germany

Luxembourg
CanadaAustralia
Spain

UK

.7

.75

Denmark
Belgium

Singapore
ThailandUSFranceChina (exc HK)

.65

Italy

India
Korea

0

200

400
600
Number of foreign affiliates

800

Notes: The horizontal line depicts the value of the Gender Gap Index for Japan. The FDI
data pertain to year 2011 and come from the Survey of Foreign Firms in Japan by
Ministry of Economy, Trade and Industry. The Gender Gap Index is from World Economic
Forum and pertains to 2012.

22

Table1a. Number of Japanese and Foreign Companies (among listed companies)

Year

Domestic

New foreign
affiliate

Old foreign
affiliate

Total

2004
2006
2007
2008
2009
2010
2011
2012

354
328
396
447
442
413
378
359

30
77
68
49
20
20
17
12

187
228
280
310
320
317
334
341

571
633
744
806
782
750
729
712

2013
2014
Total

400
336
3,853

20
36
349

381
366
3,064

801
738
7,266

Note: In the case of 12 firms, we are unable to distinguishbetween the new and the old foreign affiliate status becauseof the missing information on the year of ownership change.
Table 1b. Number of Minority, Blocking, and Majority Companies by year
(among listed companies)
Year

Domestic

Majority

Blocking

2004
2006
2007
2008
2009
2010
2011
2012
2013
2014

354
328
396
447
442
413
378
359
400
336

5
6
7
8
3
6
9
8
12
7

61
114
135
138
82
117
137
128
154
172

Total

3,853

71

1,238

Minority
151
185
207
215
256
215
206
218
238
225

Total
571
633
745
808
783
751
730
713
804
740

2,116 7,278

Note: Minority foreign owned affiliates are defined as those with theforeign ownership share of more than 10 but less than 25 percent,
Blocking share is between 25 and 50 percent. Majority foreign owned
affiliates are those with the foreign ownership share above 50 percent.

23

Table 2. Summary statistics
All sample Domestic New FDI Old FDI Majority Blocking Minority
Mean/N
Mean/N Mean/N Mean/N Mean/N Mean/N Mean/N
Foreign capital ratio

12.798
7278

3.118
3853

15.573349

24.6013064

61.00271

32.9711238

17.0022116

Old foreign affiliate

Blocking owned

0.422
7266
0.048
7266
0.010
7278
0.170

0
3853
0
3853
0
3853
0

0
349
1
349
0.006
349
0.057

1
3064
0
3064
0.022
3064
0.397

0.971
70
0.029
70
1
71
0

0.984
1236
0.016
1236
0
1238
1

0.845
2107
0.155
2107
0
2116
0

Minority owned

7278
0.291

3853
0

349
0.937

3064
0.581

71
0

1238
0

2116
1

7278
0.192
7278
0.035
6625

3853
0.203
3853
0.038
3409

349
0.184
349
0.032
330

3064
0.179
3064
0.033
2874

71
0.231
71
0.068
66

1238
0.179
1238
0.032
1171

2116
0.178
2116
0.032
1979

0.016
6367
0.011
6563

0.017
3258
0.011
3393

0.016
310
0.012
321

0.014
2787
0.011
2837

0.029
60
0.031
65

0.014
1136
0.013
1159

0.014
1913
0.009
1946

New foreign affiliate
Majority owned

Female ratio
Female manager ratio
Female director ratio
Female board member ratio

24

Table 2. Continued.
All sample Domestic New FDI Old FDI Majority Blocking Minority
Mean/N
Mean/N Mean/N Mean/N Mean/N Mean/N Mean/N
Female manager dummy

0.787
6625

0.683
3409

0.845
330

0.904
2874

0.955
66

0.93
1171

0.877
1979

Female director dummy

Short time

0.300
6367
0.138
6563
0.553
7000
0.770

0.185
3258
0.101
3393
0.398
3650
0.680

0.268
310
0.121
321
0.616
336
0.761

0.435
2787
0.185
2837
0.732
3004
0.880

0.633
60
0.400
65
0.606
71
0.901

0.498
1136
0.237
1159
0.762
1213
0.904

0.366
1913
0.137
1946
0.702
2066
0.845

Telecommuting

7001
0.104

3648
0.043

335
0.057

3008
0.182

71
0.324

1216
0.227

2066
0.131

6974
0.177
6853
0.498
5498

3636
0.062
3571
0.439
2677

336
0.152
330
0.516
254

2992
0.319
2942
0.558
2556

71
0.409
66
0.592
47

1205
0.406
1190
0.565
1070

2062
0.236
2026
0.548
1704

Female board member dummy
Flextime

Child care
Share of vacation days used25

Table 3. Foreign affiliates are more female friendly
Share of females
Workers

Managers

Directors

Board members

0.020***

0.016***

0.010***

0.004*[0.007][0.004][0.003][0.002]0.015*

0.007

0.009

0.004

[0.009][0.004][0.006][0.003]-0.013***-0.007***-0.004***-0.001*[0.003][0.001][0.001][0.001]

R2

0.354

0.299

0.173

0.142

N

7266

6613

6355

6551

Avg in Japanese companies

0.192

0.035

0.016

0.011

Manager

Director

Board member

0.103***

0.107***

0.084***[0.024][0.024][0.020]0.103***

0.046

0.044

[0.030][0.040][0.031]

0.099***

0.109***

0.023***[0.007][0.009][0.008]

R2

0.227

0.224

0.128

N

6228

6075

5614

Avg in Japanese companies

0.787

0.300

0.138

Old foreign affiliate
New foreign affiliateln (Employment)

At least one female

Old foreign affiliate
New foreign affiliateln (Employment)

Notes: The top panel presents OLS results. The bottom panel presents results from a logit
model expressed as marginal effects. All regressions control for industry-year fixed effects.
Standard errors, presented in brackets, are clustered at the firm level.
***, **, * denote significance at the 1, 5 and 10percent level, respectively.

26

Table 4a. Differences in gender outcomes: Role of the foreign ownership share
Share of female
Board

Workers

Managers

Directors

0.056**

0.041***

0.014**

0.021*[0.024][0.013][0.007][0.012]0.031***

0.022***

0.013***

0.008***[0.009][0.005][0.003][0.003]0.014*

0.013***

0.008***

0.002[0.008][0.004][0.003][0.002]-0.0120.006-0.007**-0.002*[0.039][0.018][0.003][0.001]

0.002

0.024*

0.008

0.023

[0.018][0.014][0.013][0.018]0.017*

0.007

0.009

0.004

[0.009][0.005][0.006][0.003]-0.014***-0.008***-0.005***-0.002**[0.003][0.001][0.001][0.001]

R2

0.357

0.301

0.174

0.147

N

7266

6613

6355

6551

Avg in Japanese companies

0.192

0.035

0.016

0.011

Majority owned * Old affiliate
Blocking interest * Old affiliate
Minority owned * Old affiliate
Majority owned * New affiliate
Blocking interest * New affiliate
Minority owned * New affiliateln (Employment)

Notes: OLS results. Each regression controls for industry-year fixed effects.
Standard errors, presented in brackets, are clustered at the firm level.
***, **, * denote significance at the 1, 5 and 10 percent level, respectively.

27

members

Table 4b. Differences in gender outcomes: Role of the foreign ownership share
At least one female
Board

Manager

Director

0.328**

0.174***

0.199***[0.135][0.067][0.063]0.129***

0.145***

0.141***[0.035][0.030][0.025]0.089***

0.085***

0.045**[0.024][0.024][0.022]

0.032

n.a.

n.a.

0.193

0.025

0.191**[0.148][0.123][0.082]0.101***

0.051

0.037

[0.031][0.040][0.031]

0.098***

0.105***

0.018**[0.007][0.009][0.008]

R2

0.228

0.226

0.142

N

6228

6075

5614

Avg in Japanese companies

0.787

0.300

0.138

Majority owned * Old affiliate
Blocking interest * Old affiliate
Minority owned * Old affiliate
Majority owned * New affiliate

member

[0.282]Blocking interest * New affiliate
Minority owned * New affiliateln (Employment)

Notes: The table presents results from a logit model expressed as marginal effects.
All regressions control for industry-year fixed effects.
Standard errors, presented in brackets, are clustered at the firm level.
***, **, * denote significance at the 1, 5 and 10 percent level, respectively
n.a. denotes variable dropped due to colinearity.

28

Table 5. Foreign affiliates follow different work practices
Share ofFlextime Short time Telecommuting Child carevacationdays used

Old foreign affiliate

0.069**

0.064***

0.084***

0.086***[0.027][0.024][0.021][0.025]

0.053

0.021

0.011

0.063**[0.038][0.031][0.034][0.028]0.119***

0.078***

0.042***

0.103***[0.011][0.008][0.008][0.009]

R2

0.266

0.172

0.184

0.287

N

6793

6548

5921

6307

0.040***[0.011]-0.003[0.014]0.028***[0.004]
0.449
5487

Avg in Japanese companies

0.553

0.77

0.104

0.177

0.498

New foreign affiliateln (Employment)

Share ofFlextime Short time Telecommuting Child carevacationdays used-0.0750.162

0.149***

0.120**[0.086][0.140][0.053][0.057]0.049

0.090***

0.105***

0.116***[0.038][0.034][0.025][0.030]0.083***

0.051**

0.070***

0.069***[0.029][0.025][0.021][0.025]0.040***[0.011]

Majority owned * New affiliate

n.a.

n.a.

n.a.

n.a.

n.a.

Blocking interest * New affiliate

0.281**

0.052

0.06

0.042

[0.142][0.083][0.085][0.075]

0.041

0.023

0.012

0.068**[0.039][0.032][0.033][0.029]0.120***

0.077***

0.039***

0.099***[0.011][0.009][0.008][0.010]R2

0.26720.172

0.18780.2901

N

6792

6546

5920

6306

0.049
[0.035]-0.006[0.014]0.028***[0.004]
0.449
5487

Avg in Japanese companies

0.553

0.77

0.104

0.177

0.498

Majority owned * Old affiliate
Blocking interest * Old affiliate
Minority owned * Old affiliate

Minority owned * New affiliateln (Employment)

0.059[0.037]0.039***[0.014]

Notes: Columns (1)-(4) present results from a logit model expressed as marginal effects, andColumn (5) from OLS. All regressions control for industry-year fixed effects. Standard errors,presented in brackets, are clustered at the firm level. ***, **, * denote significance at the 1, 5
and 10 percent level, respectively. n.a. denotes variable dropped due to collinearity.

29

Table 6. Foreign ownership and the Gender wage gap
FemaleFemale * Old affiliate-0.396***-0.400***-0.402***[0.025][0.024][0.024]0.034*[0.019]Female * New affiliate

0.024[0.021]

Female * Majority owned

0.113***[0.034]

Female * Blocking interest

0.024[0.025]

Female * Minority owned

0.019[0.015]

Female * Old affiliate * Majority owned

0.134***[0.038]

Female * Old affiliate * Blocking interest

0.016[0.027]

Female * Old affiliate * Minority owned

0.017[0.018]

Female * New affiliate * Majority owned-0.018[0.040]Female * New affiliate * Blocking interest

0.078***[0.028]

Female * New affiliate * Minority owned

0.026[0.019]Old affiliate
New affiliate

0.059***

0.060[0.016][0.083]0.035***

0.045[0.013][0.082]Majority owned
Blocking interest
Minority owned

0.107***

0.049[0.033][0.089]0.067***

0.009[0.018][0.083]0.034***-0.019[0.013][0.082]

R2

0.621

0.622

0.622

N

1,443,835

1,449,345

1,443,835

Notes: All specifications control for age, age squared, three educational categories, lagged ln(Employment)
and its interaction with the Female dummy. These coefficients are not reported to save space. All
specifications include industry, year, and region fixed effects. Robust standard errors, clustered on firm,
are presented in brackets. ***, **, * denote significance at the 1, 5, and 10 percent level, respectively.

30

Table 7. Predicting foreign acquisitionsln(Employment) (t-1)

0.515***[0.032]

Debt/Assets (t-1)-0.835***[0.089]R&D/Sales (t-1)

8.082***[1.366]

Share of female workers (SFW) (t-1)

1.314***[0.456]ln(Employment)*SFW (t-1)-0.226***[0.075]At least one female board member (t-1)-0.312***[0.059]Pseudo R2

0.200

N

52,616

Note: All specifications include year fixed effects.
t-1 pertains to the year of the previous survey.
***, **, * denote significance at the 1, 5 and 10 percent level, respectively.

31

Table 8. Matching results

Share of female
workers
N of acquisitions

Acquisitionyear

One periodlater

Two periods
later-0.002-0.011

0.066***(0.011)(0.019)(0.023)

463

332

185

At least one female
board member
N of acquisitions

0.045-0.0000.059(0.031)(0.038)(0.046)

463

315

182

ln(Employment)

0.040***

0.049*

0.084**(0.015)(0.026)(0.041)

488

336

186

N of acquisitions

Keeping the sample size constantShare of female
workers
N of acquisitions

Acquisitionyear

One periodlater

Two periods
later

0.016

0.088***

0.059***(0.018)(0.026)(0.029)

151

151

151

At least one female
board member
N of acquisitions

0.035

0.003

0.057

(0.060)(0.065)(0.046)

158

158

158

ln(Employment)

0.054*

0.024

0.060*(0.030)(0.036)(0.035)

177

177

177

N of acquisitions

Notes: Bootstrapped standard errors (300 repetitions).
Periods pertain to survey years.
***, **, * denote significance at the 1, 5 and 10% level, respectively.

32