2004 Fiscal Year Final Research Report Summary
Theoretical and Empirical Analyses on the Locational Determinants of MNCs
| Project/Area Number |
15530183
|
|---|
| Research Category |
Grant-in-Aid for Scientific Research (C)
|
| Allocation Type | Single-year Grants |
|---|
| Section | 一般 |
|---|
| Research Field |
Economic policy
|
|---|
| Research Institution | DOSHISHA UNIVERSITY (2004)
Nagoya University (2003) |
|---|
Principal Investigator |
OKAMOTO Yumiko Doshisha University, Faculty of Policy Studies, Professor, 政策学部, 教授 (00273805)
|
|---|
| Project Period (FY) |
2003 – 2004
|
| Keywords | FDI / MNCs / Agglomeration / Regional development / Location theory / Spatial economics |
|---|
| Research Abstract |
The objective of this study is to construct a model predicting the location of the multinational firms and to test it empirically using data of both Japanese outward FDI and inward FDI into China, Malaysia and Thailand. This study heavily utilized the theory of spatial economics; a new field of economics combining international trade theory, location theory and urban economics. The importance of the theory is that when the cost of transportation broadly defined declines, but is not eliminated completely, the forces of dispersion as well as agglomeration are generated. As a result, globalization and regionalization advance concurrently. The major findings of the study are as follows:
(1) The Japanese outward FDI, which surged in the 1980s and initially concentrated in the U.S., began to be diversified into other regions, mainly Europe and Asia since the late 1980s. In other words, a force of diversion was generated for sure under the era of globalization. Japanese firms, however, tended
… More
to concentrate in a certain number of countries in each region instead of advancing into all of the countries in an equal manner, and this force of agglomeration seems to overwhelm that of dispersion.
(2) One of the important factors to cause such a high degree of concentration is that multinational firms tend to choose the location depending not so much on the availability of low-cost unskilled labors, but on the availability of skilled labors, supporting industries, a good infrastructure these days. While the former resources tend to be found in a large number of developing countries, the latter concentrate in a limited number of countries. Besides, the unit production cost tends to decline as more firms agglomerate in a few countries due to both external and internal increasing return to scale. As a result, Japanese FDI tend to concentrate in a limited number of countries rather than disperse world wide in the global economy.
(3) The same principle is applied to the regional distribution pattern of FDI within China, Thailand and Malaysia. Multinational firms tend to agglomerate in a certain number of regions rather than disperse across the region. This is probably because these days the major locational determinants are not so much the availability of unskilled labor, but that of skilled labor, good infrastructure, and supporting industries, the latter of which tend to be found in a limited number of regions. The declining production cost due to the increasing return to scale could be another important reason for the agglomeration of multinational firms.
(4) The results of this study imply that to try to attract FDI and make it an engine of growth in a developing country or a backward region may not succeed unless a substantial effort is made initially to improve the investment climate, and to lower the cost of doing business. Less
|
Research Products
(6 results)
