Locational Analysis of Firms’ Activities from a Strategic Perspective PDF
Preview Locational Analysis of Firms’ Activities from a Strategic Perspective
Editor Toshiharu Ishikawa Locational Analysis of Firms’ Activities from a Strategic Perspective ’ Locational Analysis of Firms Activities from a Strategic Perspective Toshiharu Ishikawa Editor ’ Locational Analysis of Firms Activities from a Strategic Perspective 123 Editor Toshiharu Ishikawa Institute of Economic Research ChuoUniversity Hachioji, Tokyo,Japan ISBN978-981-13-1683-8 ISBN978-981-13-1684-5 (eBook) https://doi.org/10.1007/978-981-13-1684-5 LibraryofCongressControlNumber:2018948708 ©SpringerNatureSingaporePteLtd.2018 Thisworkissubjecttocopyright.AllrightsarereservedbythePublisher,whetherthewholeorpart of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission orinformationstorageandretrieval,electronicadaptation,computersoftware,orbysimilarordissimilar methodologynowknownorhereafterdeveloped. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publicationdoesnotimply,evenintheabsenceofaspecificstatement,thatsuchnamesareexemptfrom therelevantprotectivelawsandregulationsandthereforefreeforgeneraluse. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authorsortheeditorsgiveawarranty,expressorimplied,withrespecttothematerialcontainedhereinor for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictionalclaimsinpublishedmapsandinstitutionalaffiliations. ThisSpringerimprintispublishedbytheregisteredcompanySpringerNatureSingaporePteLtd. Theregisteredcompanyaddressis:152BeachRoad,#21-01/04GatewayEast,Singapore189721, Singapore Preface A factory producing goods has been a basic unit of economic society since the eighteenth century. Locations of the factories form the spatial skeleton of modern economic activity in geographical area. Economic agents, especially, the regional governments are required to deliberate sand strategical perspective of locations of factoriesfor creatingsoundsociety. As thisrequirement iswidely acceptedamong many regions and countries, the factories’ location attracts attention from the var- ious disciplines. And the analysis of location factors that influence the locations of the factories keeps an important position in economics. This book develops the locationanalysiscenteringonthefactory’slocationselectionsanditsimpactonthe regional economy. Importance of the factories’ locations in regional economies is successfully confirmed by referring regional economic development by three kinds of the industries. There are three types of representative methods for the regional eco- nomic development: they are agricultural development, tourism development, and manufacturingindustrialdevelopment.Advantagesoftheagriculturaldevelopment are obvious. Agriculture is operated using the natural condition of the region, and local people have long experience in agricultural management suitable to the region. And farmlands, irrigation, etc. are relatively well maintained by the local farmers.Sincevariousagriculturalproductsarenecessitiesfordailylivesandthere arealwayscertainamountsofthedemands,themanagementofagriculturalactivity is relatively stable. From these reasons, a region is relatively easy to develop local economy by using the agricultural industry. On the other hand, there are serious weaknessesthatagriculturaldevelopmentissusceptibletoinfluencethechangesin the natural condition such as weather. In addition to this, it has the following economic nature: Since the income elasticity of demand for products is low, agricultural production does not increase corresponding to an increase in the incomes; and the agricultural industry provides a region with only a small amount ofemploymentsanditsupplieslocalpeoplewithafewdiversitiesinoccupationin local society. v vi Preface Advantages and problems of the tourism in the regional development are summarized as follows. The characteristics of the tourism industry are partially similartothoseoftheagriculturalindustry.Theresortfieldofthetourismindustry uses the natural environment in local area. And the field relying on the historical places makes use of the existing well-known resources in the area. Regions which havesomeadvantagesinnaturalandhistoricalcontextseasilycarryoutthetourism development with relatively small initial investments. In addition to these, the tourismdevelopmentisevaluatedfromthefactthatthetourismindustrycouldplay an important role in a creation of innovation: a technological innovation in the globalization economy becomes a decisively important factor for economic development, and some high-skilled workers who take charge of the advanced technologyareinterestedinlocalcultureandtechnologies.Iftheregiondrawstheir attention,andbythisreasonthetechnologyexchangewithotherpartsoftheworld progresses, the possibility of technological innovation could be created in the region. As a result, the tourism may play a role in enhancing regional industrial composition in the region. While, the tourism development has the same weakness as the agricultural one. The tourism development is susceptible to influence of the changes in the natural conditionssuchasweatherfluctuationinowncountryandothercountries.Seasonal fluctuation also affects employment in this industry. And the tourism development does not create employment on a large scale and does not provide the large diversities in occupation in regions. Finally, the manufacturing industrial development does not have serious weaknessoftheabovetwodevelopmentmethods.Andthemanufacturingindustrial development has its own advantages different from the above two industries. Its advantages are better represented by the machine-assembled industry such as the automotive sector. The machine-assembled industry is related to many other industrial sectors. For this reason, the location of the machine-assembled industry attracts various sorts of the related sectors and they attract a great deal of workers and provide diverse occupations inaregion.The locationsite ofthem becomesan accumulation place of diverse individualities and talents. Consequently, the man- ufacturing industrial development does have a great opportunity to provide large amounts of employments and great diversities in occupation in region. The region where diverse personality and talent gather is vibrant and highly likely to be an imaginative area. The realization of such a region is the primary purpose of the regional development, and the manufacturing industrial development is judged as the advantageous method for realizing such regions. The manufacturing industrial development has also problems that should be resolved as well as the other development methods. Production infrastructure and workers’ lifeline are indispensable to operate the factories smoothly. Therefore, theregionisrequiredtospendhugepaymentswhichareinvestedinequipmentfor the production activities. And in a case of attracting the factories from outside the region, various subsidies and income tax exemptions may be necessary. The implementation of these attraction policies is a considerable financial burden for the region. In addition, since regions attract the factories that conform to the Preface vii industrial composition for which the region aims, it must carefully select the fac- tories to attract over time. Although the challenges mentioned above are in the manufacturing industrial development, the long-term achievement achieved by the manufacturing industrial developmentismorethanoffsettingthem.Itissaid,therefore,thatmanyregionsin the world have been oriented toward regional vitalization by attracting industrial factories. Based on the above facts, this book starts to analyze the location factors which influence the factory’s location. The first part of Part I selects three kinds of the traditional location factors from many factors that affect fundamentally factories’ locations, the transportation cost, and the agglomeration economies. Their loca- tional works are analyzed in the different frameworks: The transportation cost is a decisive location factor before the industrial revolution and basically decides locations of the many kinds offactories. Due to the development of transportation infrastructure, its relative influence is gradually reduced, but it is still a central position among the location factors. Therefore, we consider systematically the transportation costs from an economic geographical point of view (“K. Schliephake”). Then, during the period from the Industrial Revolution to the 1970s, the agglomeration economies strengthen its influential power on location determination, and it becomes a strong location factor to align shoulder with the transportation cost. Meanwhile, the content of the agglomeration economy is changed from the simple use of the external economy related with a large pro- duction infrastructure to the utilization of the external economies generated from theenormousproductionrelationshipswithinandbetweentheagglomerationsites. Againstthisbackground,itisexaminedhowagglomerationeconomyplaysarolein regional economy (“D. Nakamura”). After elucidating locational effect of these traditional factors, we will examine the industrial parks attracted the factories’ locations by integrating the workings of the above location factors. The industrial park’s location and its production composition clearly express how three kinds of the traction powers of transportation costs, labor costs, and agglomeration economy are integrated and how they influence the factory’s location. Since industrialparkcanintegratethetractionpowersofthesethreelocationfactors,itis considered as a powerful means of attracting the factories and has been applied in many countries since the 1960s. Since the establishment of the industrial park requires a huge initial investment, the regional government becomes a powerful developeroftheindustrialparks.Andtheyuseindustrialparksasastrategictoolto revitalize regional economies: Regional governments can integrate the multiple factories in a specific intended area through an industrial park. In this part, the location of the industrial park and its production composition are theoretically analyzed from the viewpoint of location theory (“T. Ishikawa”). In the next analysis of Part 1, two new location factors emerged in the global- ization economy are selected: one factor is the government policy. In the devel- opment stage where the globalization economy progresses, the government’s location policy plays an important role in inducing factories from the foreign countries to regions in home country. Normally, a factory is oriented to the viii Preface reduction of its production cost, thus, the place at which the production cost is minimized becomes one of the strong location candidate sites. Thus, until global- ized era, the places having advantage in transportation cost, labor cost, and agglomerationeconomiesattractmanyfactories.However,recently,thecaseshave beenreportedinwhichtheregionalgovernmentsproposedtoprovidethefirmswith large amounts of demand for their goods and they succeeded in attracting the factories. Such a case seems to be theoretically possible, but it has not been con- sideredmuchinthetraditionallocationtheory.Theanalysisheretakesanexample of the factories that move from Taiwan to the inland China by the location policy and it inquires the process of the location movement of the factories (“Y. Sun”). Similar to the government’s location policy, the corporate tax rate of the country may affect the firm’s determination of its factory location. Locational influences of the tax systems of the country are examined: The cost cutting competition betweenthemanufacturingfirmsduetotheglobalizationeconomymakesthefirms’ production processes fragmented and the fragmented processes disperse interna- tionally to realize lower cost. For this reason, the firm’s production organization becomesinternationalandthelocationsiteoffactoryisaffectedbytheinstitutional differencesbetweenthecountries:Artificialinstitutionsandstrategicalpoliciesthat aredevisedbyvariouscountriesbegintogreatlyaffectthelocationsofthefactories andthefacilitiesofthemanagement.Theanalysisdealswiththeoverdraftexpense systemandadjustmentmethodofinternational doubletaxation,etc.areselectedas the location factors and their location effects are examined (“J. Itoh”). Part II of the book moves its main focus to the city and the city systems. Cities are the places where many production and consumption activities are variously connected and realized in different forms. Since these two kinds of the economic activities are conducted by people living in urban areas, the city is a place that representsthehumaneconomicactivitiesingeneral.Itcouldbesaidthatifthecities donotexist,thefactoriesdonotachievetheirworksandtheindustrialmanagement cannot operate in the modern world. Part II considers the relationship between the factories and the city and city system as follows. The factories locate in the industrial area in which the factories enjoy the localization economy generated in thearea.Industrialareadoesnotexistisolatedmannerapartfromacity,butthearea locates in the city area to use the urbanization economy provided in the city. And the city also does not exist in isolation, but it exists as a member of a city system and enjoys the comprehensive urban economies provided by the city system. And then thecity systemenjoys thenetwork benefitsfrom theconnections between the city systems. Factories, industrial areas, cities, and city systems are interdependent from each other in the modern world. These mutual dependencies between them affect the regional economy in terms of the factory’s products and the city’s function composition. From the viewpoint of a firm that strategically manages its factories, it is importanttograspthecharacteristicsofthecitiesandthecitysystemsinsearching factory’s location. Firms analyze what kind of benefits the city and city system providetothefactory.While,understandingcharacteristicsofthecitiesandthecity systems in the region is also important for the government planning to attract Preface ix production activities to the intended place. Without understanding of them, the governments cannot plan to attract appropriate the factories into the region. Considering the above background, Part II develops the analysis of the city system as follows. Many empirical studies on the distribution of the cities’ popu- lations indicate that there are certain regularities in the distribution. The rank size rule is known as a theory explaining the regularity of the distribution of the cities’ populations.Hence,therelationshipbetweentheranksizeruleandthecitysystem isanalyzedtheoretically(“H.Kozu”).Andthen,thefocusoftheanalysisisshifted tothequestionofhowthepositionofacitychangesintheranksizerulewhenthe city’s population varies (“T. Ishikawa”). Last analysis of Part II inquires the rela- tionshipsbetweenthecitysystemandtheregion’sperformances.Thelogicbehind the analysis here is as follows. The factories enjoy external economies from cities through the industrial areas, and then, the cities are affected by receiving various influences from the city system. Hence, the economic performances achieved in a region may be reflected in the structure of city system in the region. Based on this logic,therelationshipsbetweenthecitysystemsandtheregionalperformancesare examined using Chinese data. The results derived from the examination show the positive relationships, thus, they may be used as useful data for making the gov- ernment’s strategical location policy (“N. Wang”). In the era of the globalization economy, the structure and characteristics of the city systems are judged to be an important location factor to the firm’s location selections and the government’s location policy. Part III of this book deals with the production activities in the regions and the countriesontheframeworkoftheempiricaleconomicanalysis.Manycountriesare trying to enhance their industries and to proceed their economic development for thelongtime.Andasmeansofachievingthesegoals,thegovernmentsoftenbuild industrial estates. In these days, the individual industrial parks are established to achieve the specific objective clearly: The governments construct the industrial parkstoachievetheformationofeconomicbasementsforregionaldevelopment,to construct new city, to advance the industrial composition, and promotion of tech- nologytransfer.Inaccordancewiththesepurposes,thenameoftheindustrialpark has been expressed as managed workshops, enterprise zones, business and inno- vation center, and technology park. Part III proceeds the analysis as follows: Industrialparks andcompanyzoneshavebeenstrategicallydevisedfor supporting economic growth and forming the foundation of regional development. Thus, it considerswhatkindofexpectationtheindustrialparkandenterprisezonearebeing expected by the primary economic agents such as the manufacturing firms and the governments, and it evaluates the possibility of the role that industrial parks can play in regional development in industrialized countries using Sweden as case (“L. Westin”). And then, the analysis selects Philippine and studies Philippine’s case as to what role the strategically planned industrial park has played, and it clarifies how much achievement has been achieved in Philippine (“A. Dumayas”). Finally,thescopeoftheanalysisinPartIIIismovedfromtheproductionrealm to the related areas, and two things are selected. That is, the economic impacts of the trade system surrounding the production activities are analyzed in the x Preface ASEANcountries(“H.Taguchi”and“E.Nishi”).Then,itconsiderstheproblemof povertyandinequalitycausedbyproductionactivitiesinChina,whichisadvancing economic development at an extremely fast rate. (“N. Wang”). And the analysis focuses on India, and it examines the economic disparities in this country (“M.Hayashi”,“K.Kalirajan”).Theseconsiderationsprovideimportantinsightsto theeconomicagentstryingtomaximizetheeffectivenessoftheindustriesexpected to produce liveliness and creativity in the regions. The locations of the factories should socioeconomically contribute to both the firms and the areas where the factories are located. The analyses of this book are expected to contribute to building such a reciprocal relationship between firms and regions.1 Hachioji, Japan Toshiharu Ishikawa 1Themanyacademicresultspresentedinhisbookhavebeenachievedthroughthesupportofthe Japanese Ministry of Education, Supported Program for the Strategic Research Foundation at privateUniversity,2013–2017,andtheJapanSocietyforpromotionofScience(Grant-in-Aidfor ScientificResearch(C)17K03712).
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