Competing at Home to Win Abroad: Evidence from Japanese Industry

Abstract

The study explores the influence of domestic competition on international trade performance, using data from a broad sample of Japanese industries. Domestic rivalry is measured directly using market share instability rather than employing structural variables such as seller concentration. We find robust evidence that domestic rivalry has a positive and significant relationship with trade performance measured by world export share, particularly when R&D intensity reveals opportunities for dynamic improvement and innovation. Conversely, trade protection reduces export performance. These findings support the view that local competition, not monopoly, collusion, or a sheltered home market, pressures dynamic improvement that leads to international competitiveness.

JEL Classification: F14, L11