This paper develops an analytical framework for a multiregional market in monopolistic competition. Regional firms compete on the basis of research and development activities which are designed to increase the quality of their products. Product quality is related to the size of each firm's knowledge-handling workforce and its accessibility to stocks of knowledge. A case study into five major R&D-intensive manufacturing industries reveals that accessibility to local sources of knowledge is a crucial factor in the location decisions of Japanese firms. Face-to-face communication is shown to be just as effective for knowledge workers in the Kansai Region as for those in Tokyo.
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The first author acknowledges financial support from the Japan Society for the Promotion of Science towards the work described in this paper. He is also indebted to Kyoto and Tottori universities for their generosity and cooperation during his visiting periods in Japan.
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Batten, D.F., Kobayashi, K. Product quality and regional accessibility to knowledge among Japanese manufacturing industries. Ann Reg Sci 27, 79–94 (1993). https://doi.org/10.1007/BF01581834