Leaders of Liberalization or Partners of Protectionism?
Multinational Firms in the Japanese Political Economy
This project examines the effects of internationalization on the politics of trade. Although many countries have opened their markets to multinational firms, there is significant variation in how these firms behave once they enter a host country. How do multinational firms’ political strategies evolve as they gain access to a host country? Why do multinational firms become leaders of liberalization in some cases but partners of protectionism in others? I argue that the early stages of trade liberalization shape firms’ strategies and their propensity to form political coalitions with local actors, which has consequences for the subsequent trajectory of political change.
I test my theory through a cross-sectoral analysis of Japan, which provides a fruitful context in which to multinational firms because it was remarkably closed to the latter until a relative boom in inward foreign direct investment in the 1990s and 2000s. These conditions make it easier to isolate the effects of trade liberalization, and they also make Japan a “crucial” case for theories about internationalization. I draw on qualitative and quantitative data from interviews, direct observation, archival material, market data, and newspaper articles collected during over three years of field research in Tokyo and Washington, DC. In particular, I focus on in-depth case studies of four sectors which display different patterns of initial liberalization: agriculture, pharmaceuticals, insurance, and information technology. I also provide extensions of the theory to other sectors such as commercial aviation, automobiles, telecommunications, luxury goods, soft drinks, and retail.
I find that while foreign multinational firms were initially dependent on their home governments to influence Japanese policy, opportunities for these firms to employ political strategies both independently and in coalition with Japanese partners increased with the opening of the Japanese economy and society. However, these changes were not uniform across sectors. In cases of broad liberalization, multinational firms pushed for the greater liberalization and harmonization, while in cases of narrow liberalization, these firms became insiders who preferred to maintain the market barriers that gave them privileged access in the first place. These findings contribute to the study of political economy by shedding light on how globalization may be reshaping the political arena in countries around the world.
This research has been generously supported by Harvard University, the Japan Foundation, the Boren Fellowship, the University of Tokyo, Waseda University, the UC Berkeley Center for Japanese Studies, and the UC Berkeley Department of Political Science.