Global supply chain, vertical and horizontal agglomerations, and location of final and intermediate goods production sites for Japanese MNFs in East Asia: evidence from the Japanese Electronics and Automotive Industries

Abstract

This paper conducted an empirical analysis using an NEG model to investigate the factors in choosing overseas locations for the relevant MNFs’ production sites for both final and intermediate goods by looking at these companies’ final and intermediate production sites separately. Therefore, we focused on two major Japanese industries: the Japanese global-type electronics and the pyramid-type automotive industries. After construction of the three hypotheses; the first hypothesis that the agglomeration of the final goods production sites for Japanese MNFs in a particular country can occur because of the concentration of the intermediate goods production sites for Japanese MNFs in that countries; the second hypothesis that the agglomeration of the final goods production sites for Japanese MNFs in a particular country can occur because of the market potential of the final goods production sites in that countries or neighboring countries; and the third hypothesis that the agglomeration of the final goods production sites for Japanese MNFs in a particular country can occur because of the supplier access of the intermediate goods production sites in that countries or neighboring countries, we estimated this location choice model. In first and third hypotheses, we found that the agglomeration of the final goods production sites for Japanese electronics firms in a particular country can occur because of the total supplier access of the intermediate goods production sites (vertical supply linkage) and supplier access in neighboring countries (global vertical supply linkage) as well as vertical and horizontal Japanese industrial agglomerations, whereas the agglomeration of the intermediate goods production sites for Japanese electronics firms in a particular country can occur because of the total supplier access of the intermediate goods production sites and supplier access in neighboring countries as well as vertical Japanese industrial agglomeration. In the second hypothesis, we found that the agglomeration of the final goods production sites for Japanese MNFs in a particular country can occur because of the market potential of the final goods production sites in that countries, whereas the agglomeration of the intermediate goods production sites for Japanese MNFs in a particular country can occur because of the domestic market potential of the intermediate goods production sites in that countries.