Sequential Investment, Firm Motives, and Agglomeration of Japanese Electronics Firms in the United States
Wilbur Chung and Jaeyong Song
Recent research finds that firms investing abroad tend to agglomerate with other foreign entrants. Yet firms often invest multiple times within the same host country, which raises the question of whether firms agglomerate with their competitors’ or their own prior investments. Collocation’s attractiveness also may vary as a firm’s entry motives evolve. The activities of prior and present investments often differ—initial investment may be for distribution while later ones might be for manufacturing. For Japanese investment into the United States in the electronics sector from 1980 to 1998, we find that firms tend to collocate only with their own prior investments. The exception is firms with little of their own experience, who tend to collocate with competitors. These results demonstrate the importance of firm heterogeneity in determining agglomeration behavior.