An Empirical Analysis of Agglomeration Effects on the Location Choice of Japanese Electronics Firms in China Using Provincial Data

Abstract

In this paper, we examine the hypothesis that agglomeration has an important effect on the location choice of Japanese electronics firms in China in line with Krugman [18], Fujita and Krugman [6], Fujita, Krugman, and Venables [7] (new economic geography, in short NEG). Using the data from Cyugoku Sinsyutsu Kigyou Ichiran 2003-2004 (Japanese enterprise investments in China 2003-2004), we estimated a location choice model of Japanese electronics firms with market potential, industrial agglomeration and traditional factors such as wage, infrastructure and policy incentives as explanatory variables. The results of this estimation showd that the agglomeration effects play an important role in choices for location of Japanese electronics firms in China. © 2007, JAPAN SECTION OF THE REGIONAL SCIENCE ASSOCIATION INTERNATIONAL. All rights reserved.