Firm Productivity and Foreign Direct Investment in the Services Sector: A Firm-Level Analysis using Japanese Data

Using Japanese firm-level data, I examine whether multinational enterprises (MNEs) are more productive than non-MNEs in the services sector. I employ the Kolmogorov-Smirnov (KS) test to compare the overall distribution of productivity by multinational status. The results indicate that MNEs tend to be more productive than non-MNEs in the services sector and suggest that the standard firm heterogeneity model can well explain foreign direct investment (FDI) by firms in the services sector.