Abstract
In this paper, we present an analysis of the determinants for overseas location choices of production sites for Japanese agriculture-based food industry multinational firms (MNF) in East Asia for 1985–2009 with a conditional logit model based on new economic geography (NEG). Especially, two periods 1985–1999 (weak agglomeration period) and 2000–2009 (strong agglomeration period) were focused on for the degree of agglomeration of Japanese food MNFs in East Asia, and overseas locations of all-goods and final goods production sites. Results illustrate the following four points. First, for all-goods production sites during the weak agglomeration period (1985–1999), we found that market access (MA) and domestic market access (DMA) in the target country, but not MA in neighboring countries (FMA) are determinant factors. In addition, supplier access (SA) and SA from surrounding countries (FSA), but not the domestic supplier access (DSA) in the target country and the SA from Japan (JFSA), are determinant factors. This is contrary to our expectations. Second, for all-goods production sites during the strong agglomeration period (2000–2009), we found MA and DMA are determinant factors, but FMA is not. DSA and JFSA, but not SA and FSA, are also determinant factors as expected. Third, due to rapid expansion of the domestic market in East Asia during 2000–2009, the estimation results for final goods production sites during the strong agglomeration period (2000–2009) revealed that the final goods production sites are located in the target country because of (1) MA and DMA but not FMA; (2) the DSA of materials and intermediate goods production sites and domestic agricultural output; and (3) inexpensive labor, infrastructure improvements, incentive policies, vertical agglomerations, and freeness of trade. Finally, the above two-period analysis demonstrates that it is necessary to take into account changes in the Japanese and global economic structures when setting the estimation period for Japanese food firms and choosing overseas locations.
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Notes
For these survey results in every year, see the “deciding factors for investment”, by the Ministry of Economy, Trade and Industry’s annual “Basic Survey on Overseas Business Activities” in every year.
For previous studies of the determinations for Japanese food FDI location choices, see Kiminami and Kiminami (1999), Tokunaga and Akune (2003), Sattaphon and Kiminami (2005), Lu and Tokunaga (2009), and Akune et al. (2003), Akune and Tokunaga (2007, 2012). For outward FDI in China’s food industry, see Takahashi (2016). Furthermore, for multinationals and economic geography, see Mucchielli and Puech (2004), Head et al. (2004) and Iammarino and McCann (2013).
For this point in detail, see Fujita and Thisse (2013), Sect. 8.2.
Interviews conducted at Japanese food companies located in Dalian, China, and at JETRO’s Dalian office found that the major reasons that Japanese firms located in the area were the availability of high-quality inexpensive labor, good infrastructure (a good harbor), municipal and government incentives to attract foreign capital [On-site survey of Japanese food and electric/electronics-related firms in Dalian, China, and JETRO’s Dalian office (November 2013)] (Ikegawa and Tokunaga 2018).
As the agglomeration of Japanese food firms further widens the disparity in this market size among the domestic manufacturing market, if above hypothesis is adopted, then there is the home market effect (HME), see Sect. 9.3 in Fujita and Thisse (2013). For vertical and horizontal agglomerations, see Tokunaga and Ikegawa (2019).
For this point in detail, see Fujita and Thisse (2013), Sect. 8.2 and 9.3.
We eliminated those firms whose entry date was unknown.
Ikegawa et al. (2014) analyzed the location of Japanese frozen food industry in East Asia and found that domestic market potential and supplier access of raw materials and investment promotion policy variables affect the locations of Japanese frozen food industry investment. For the overseas location for Japanese electronics industry, see Tokunaga and Ikegawa (2019).
As vertical and horizontal industrial agglomerations of Japanese food manufacturing industry’ domestic locations in Japan exist, similar to Tokunaga et al. (2005, 2006, 2008, 2014, and 2017).
Comparing the results of the Japanese food industry with the results of the location choice of the Japanese electronics and automobile industry’s final goods production sites in East Asia, the magnitudes of the coefficients of vertical and horizontal agglomeration are reversed. This suggests that the agglomeration of the Japanese food industry’s intermediate goods production sites (vertical agglomeration) is important for location choice of the Japanese food industry’s final goods production sites.
As we found that the variable of freeness of trade was crucial, we construct data of the market access and supplier access variables derived from the NEG model using a bilateral gravity type trade equation and use these data in the estimates (see Ikegawa and Tokunaga, 2018).
Akune and Tokunaga (2012: Location of final goods production sites of Japanese food firms, 1985–2005) estimated that the sine condition of MA is positive and statistically significant, while the sine condition of SA_itm is negative and not statistically significant. However, in this paper (Location of final goods production sites of Japanese food firms, 2000–2009), the sign condition of both DMA and DSA_itm is positive and statistically significant. This is one of the contributions of this paper.
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Acknowledgements
This study was supported by Japan Society for the Promotion of Science (Grant no. 24330073H) and Research Grant (no. 14730) by Reitaku University in Japan. The authors would like to thank Enago (http://www.enago.jp) for the English language review.
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Tokunaga, S., Akune, Y. & Ikegawa, M. Market access, domestic and Japanese supplier access, vertical agglomerations and overseas locations of Japanese food multinational firms in East Asia: comparison of the 1985–1999 and 2000–2009 periods. Asia-Pac J Reg Sci 5, 1023–1051 (2021). https://doi.org/10.1007/s41685-021-00195-7
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DOI: https://doi.org/10.1007/s41685-021-00195-7
Keywords
- Japanese food MNFs’ location
- NEG model
- Home market effect
- Vertical agglomeration
- Vertical supply linkage
- Market access and supplier access
- Conditional logit model