Sequential Investment, Firm Motives, and Agglomeration of Japanese Electronics Firms in the United States
32 Pages Posted: 14 Nov 2002
Date Written: August 2002
A key strategic choice for multinational firms is where to locate. When investing abroad, firms may find collocating with their own and competitors' prior investments beneficial. Such agglomeration may provide knowledge and infrastructure spillovers. Yet, as a firm invests sequentially, its past and present motives often differ. A firm may initially invest for distribution but later to manufacture, which changes the value of agglomerating. For Japanese investment into the US in the electronics industry for 1980-1998, we find that firms tend to collocate only investments of similar motives. Also, competitors' presence attracts firms with little of their own experience; though on average, firms avoid states where their competitors previously located. These results suggest that agglomeration is not viewed as uniformly beneficial.
Keywords: FDI, agglomeration, motives, sequential investment
JEL Classification: F23, R30, L21
Suggested Citation: Suggested Citation