Market Potential, Agglomeration, and Global and Regional Location of Japanese Multinational Firms in East Asia: The Case of the Electrical and Electronics Industry

Japanese Foreign Direct Investment (FDI) increased sharply in the late 1980s and early 1990s, especially since the JPY appreciation following the Plaza Accord in 1985. During this time, the globalization of Japanese firms rapidly progressed. Before this, most Japanese FDI was located in the USA and European Union; Japanese FDI to East Asia proliferated after the Accord. This chapter assesses the determinants of global and regional plant locational choice using microlevel data on Japanese multinational firms located worldwide, focusing on East Asia, especially China. From the results, combined survey responses of Japanese firm managers with the empirical estimation of location choice in the Japanese electrical and electronics industry since 1986, we found that real wage, market potential, and agglomeration variables play important roles in location choices of Japanese manufacturers in East Asia and China.