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Japanese Direct Investment in Mexico's Transport Equipment Sector pp 31–53Cite as

Locational Determinants of Japanese Automotive FDI in Mexico: A Spatial Analysis

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Part of the book series: New Frontiers in Regional Science: Asian Perspectives ((NFRSASIPER,volume 22))

Abstract

This study examines regional determinants of Japanese automotive firm location in Mexico. Specifically, the analysis is focused on automotive suppliers at a municipal level from 2000–2010. The results show that three main factors determine plant location: industrial park presence in a municipality, agglomeration of Japanese automotive firms, and proximity to a major Japanese automotive assembly plant. Under certain specifications, market size and labor quality were also significant. The findings suggest a preference from Japanese firms for agglomeration in production sites that facilitate the transition to the new host country and favor spatial and organizational integration between customer and supplier firm.

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Notes

  1. 1.

    Although there is no clear consensus on the topic, recent studies that have searched for “inter-industry” spillovers have found supporting results for the hypothesis linking FDI to productivity and technological enhancements in local firms. For comprehensive literature reviews see Gorg and Greenway (2003) and Guzman-Anaya (2013).

  2. 2.

    Chen (1997) calculates the efficiency wage by dividing the average wage in a province by the average productivity per province, where the average productivity is determined by either the value-added in an industry or the industrial output by worker. Lower ratios imply higher levels of “efficiency wage” and thus a more attractive location to FDI.

  3. 3.

    This type of behavior by Japanese firms was observed and documented for Mexico’s western region. See Kakihara and Guzman-Anaya (2014).

  4. 4.

    Hyun (2008) mentions two main policies that the European community put forward to hinder Japanese companies’ market access. First, a strict reciprocity guarantee from Japan to create mutual balance of advantages and increase the position of European car manufacturers. And second, a Voluntary Export Restraint (VER) on Japanese cars limiting the market share obtained in Europe until European car manufacturers reached similar levels in Japanese markets.

  5. 5.

    The directory compiles information on the overseas activities of Japanese firms all over the world.

  6. 6.

    It is important to point out that for some firms only state-level location was specified, so additional research to determine the specific municipal-level location was conducted. Also, some observations did not specify the industrial activity of the firm. For these cases further information was gathered through the company’s website or from Japan’s Chamber of Commerce and Industry Directory 2015. This directory is published at an annual basis. It includes information on the activities of Japanese firms in Mexico, including: company name, address, contact information (telephone, fax, and email), website and industrial activity (www.japon.org.mx).

  7. 7.

    The results from these regressions are not reported, but are available upon request.

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Author notes

    Authors and Affiliations

    1. Human Resources Department, University of Guadalajara, Zapopan, Mexico

      Leo Guzman-Anaya

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    1. Leo Guzman-Anaya
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    Correspondence to Leo Guzman-Anaya .

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    Editors and Affiliations

    1. Pacific Studies Department, University of Guadalajara, Zapopan, Mexico

      Melba Falck-Reyes

    2. Human Resources Department, University of Guadalajara, Zapopan, Mexico

      Leo Guzman-Anaya

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    Guzman-Anaya, L. (2018). Locational Determinants of Japanese Automotive FDI in Mexico: A Spatial Analysis. In: Falck-Reyes, M., Guzman-Anaya, L. (eds) Japanese Direct Investment in Mexico's Transport Equipment Sector. New Frontiers in Regional Science: Asian Perspectives, vol 22. Springer, Singapore. https://doi.org/10.1007/978-981-10-7718-0_3

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