On the Evolution of the Spatial Economy with Multi-unit/Multi-plant Firms: The Impact of IT Development

This paper examines how the decline of communication costs between management and production facilities within firms and the decrease in trade costs of manufactured goods affect the spatial organization of a two-region economy with multi-unit/multi-plant firms. The development of information technology decreases the costs of communication and trade costs. Thus, the fragmentation of firms is promoted. Our result indicates that, with decreasing communication costs, firms producing low trade-cost products (such as consumer electronics) tend to concentrate their manufacturing plants in low wage countries. In contrast, firms producing high trade-cost products (such as automobiles) tend to have multiple plants serving to segmented markets, even in the absence of wage differentials.

International Competitiveness of Manufacturing Firms in sub-Saharan Africa

As the success of East Asian countries has shown, labor-intensive industry is recognized to lead economic growth in the early stages of development, utilizing relatively low labor costs. This same growth process has already started in South and South East Asian LDCs since the mid-1990s. However, the manufacturing sector in sub-Saharan Africa has been underdeveloped and manufacturing exports, in particular labour-intensive goods, have stagnated. This paper investigates the international competitiveness of the African manufacturing sector and its determinants through an analytical survey of empirical studies and a comparison with Asian low income countries. Empirical evidences indicate that primary factors of competitiveness, namely productivity, labour cost and exchange rate are unfavorable in sub-Saharan Africa. Representative arguments attribute the weak competitiveness to problems in the business environment, factor endowment, and the exchange rate. However, careful review shows that labour cost is beyond the range explained by endowment and misalignment of exchange rates have been reduced in Africa. Moreover, comparison with Asian low income countries which have competitiveness in labour-intensive goods shows no difference in the quality of business environment, while the labour cost is significantly lower than sub-Saharan African countries. Although results should be considered tentative, high labour cost beyond endowment and conservative investment behavior emerge as important factors for the weak competitiveness in sub-Saharan Africa when controlling income level.

Regional Cooperation of Small & Medium Firms in Japanese Industrial Clusters

This study examines the effects of intra-regional cooperation among firms and institutions on the growth of firms, using the unique data set of questionnaire survey collected in the three major industrial clusters in Japan. In contrast to the existing studies on regional innovations or agglomeration economies, this study explicitly focuses on the detailed contents of cooperative activities with two specific viewpoints: 1) the contents of regional cooperation in each of the three production stages of R&D, commercialization, and marketing, and 2) the detailed types of alliance partners. Our results demonstrate three points: 1) positive correlations are observed between the intensity of regional cooperation and the firm growth rate and R&D expenditure, 2) horizontal cooperation such as alliances with universities and cross-industry exchange organizations has positive significant effects on the growth rate of firms, which is in contrast with the previous studies that stressed only the role of vertically integrated inter-firm linkages in Japan, and 3) contents and partners of regional cooperation are different among the three clusters based on different dominant industries.

Local Firms in Latecomer Developing Countries amidst China's Rise -The case of Vietnam's motorcycle industry-

This paper examines the impact of China's recent rise on the development of local firms in latecomer developing countries. Based on a detailed analysis of Vietnam's motorcycle industry, the paper argues that China's impact may go beyond what a trade analysis suggests. Indeed, China's rise induced a dynamic transformation in the structure of value chains within Vietnam's motorcycle industry, bringing about far-reaching consequences on the development and upgrading trajectories of local firms. The implications of the case study for the wider "global value chain" approach is also discussed.

Has Low Productivity Constrained Competitiveness of African Firms? : Comparison of the Firm Performances with Asian Firms

It has been argued that poor productive performance is one of critical sources of stagnation of the African manufacturing sector, but firm-level empirical supports are limited. Using the inter-regional firm data of the garment industry, technical efficiency and its contribution to competitiveness measured as unit costs were compared between Kenyan and Bangladeshi firms. Our estimates indicated that there is no significant gap in the average technical efficiency of the two industries despite conservative estimation, although unit costs greatly differ between the two industries. Higher unit cost in Kenyan firms mainly stems from high labour cost, while impact of inefficiency is quite small. Productivity accounts little for the stagnation of garment industry in several African countries.

Bank Borrowing and Financing of Medium-sized Firms in Indonesia

The improvement of financial intermediation functions is crucial for a robust banking system. When lending, banks have to cope with such problems as information asymmetry and adverse selection. In order to mitigate these problems, banks have to product information and improve their techniques of lending. During the 1998 financial crisis, Indonesia's banking system suffered severe damage and revealed that the country's banking intermediation functions did not work well. This paper examines the financial intermediation functions of banks in Indonesia and analyzes the importance of bank lending to firms. The focus is on medium-sized firms, and "relationship lending", one of the bank lending techniques, is used to examine financial intermediation in Indonesia. The results of logit regressions show that the relationship between a bank and a firm affects the probability of bank lending. The amount of borrowing and collateral are also affected by a firm's relationship with a bank. When viewed from the standpoint of relationship lending to medium-sized firms, Indonesian banks cannot be criticized for any malfunction of financial intermediation.

Value Chain Dynamics and Growth of Local Firms:The Case of Motorcycle Industry in Vietnam

Vietnam’s burgeoning market for motorcycles has attracted global industry eaders,players from developing countries, and local firms. This has led to a dynamic evolution of value chains. This paper presents an explanation of the varieties of the growth patterns xperienced by the local suppliers, focusing on the roles of customer and local supplier strategies. Case studies showed that while the role of customers may be important, strategies of suppliers to improve the ompetitive edge in the production of otorcycle components and to diversify into other products account for important ariations of growth trajectories among local suppliers. Findings presented in this paper suggest the need to direct more attention to strategy that local firms use to boost their competitive edge in business.

Linked versus Non-linked Firms in Innovation: The Effects of Economies of Network in Agglomeration in East Asia

This paper proposes a new mechanism linking innovation and network in developing economies to detect explicit production and information linkages and investigates the testable implications of these linkages using survey data gathered from manufacturing firms in East Asia. We found that firms with more information linkages tend to innovate more, have a higher probability of introducing new goods, introducing new goods to new markets using new technologies, and finding new partners located in remote areas. We also found that firms that dispatched engineers to customers achieved more innovations than firms that did not. These findings support the hypothesis that production linkages and face‐to‐face communication encourage product and process innovation.

FDI and Export Participation of Local Firms in Africa: The Case of the Kenyan Garment Industry

FDI in the garment sector has been the single case of large-scale manufacturing investment in African low-income countries since the 1990s. While FDI has triggered the development of local industries in many developing countries, it has not yet been realized in Africa. This paper describes the spillover process in the Kenyan garment industry and investigates the background of local firms' behavior through firm interviews and simulation of expected profits in export market. It shows that credit constraint, rather than absorptive capacity, is a primary source of inactive participation in export opportunity. Only firms which afford additional production facilities without sacrificing stable domestic supply may be motivated to start exporting. However, in comparison with successful Asian exporters, those firms were not as motivated as Asian firms due to the large gap in expected profits.

A two-dimensional analysis of the impact of outward FDI on performance at home: evidence from Japanese manufacturing firms

This paper empirically investigates two areas of changes in firm behavior and performance at home before and after investing abroad. The first change is dependent upon the type of foreign direct investment (FDI): horizontal FDI or vertical FDI. The second change is dependent upon the firm’s domestic activities: production activities or non-production activities. From a theoretical standpoint, the impact of outward FDIs differs not only by type, but according to the firm’s activities. By exploiting two types of firm-level data that enable us to distinguish between production and non-production activities, our paper provides a detailed picture of the intra-firm changes in behavior and performance that occur as a result of production globalization.

Measuring fixed costs for firms' use of a free trade agreement : threshold regression approach

In this paper, by employing the threshold regression method, we estimate the average tariff equivalent of fixed costs for the use of a free trade agreement (FTA) among all existing FTAs in the world. It is estimated to be 3.2%. This global estimate serves as a reference rate in the evaluation of each FTA’s fixed costs.

Chapter 2 Equilibrium locations of upstream and downstream firms

This paper explores the interaction between upstream firms and downstream firms in a two-region general equilibrium model. In many countries, lower tariff rates are set for intermediate manufactured goods and higher tariff rates are set for final manufactured goods. The derived results imply that such settings of tariff rates tend to preserve a symmetric spread of upstream and downstream firms, and continuing tariff reduction may cause core-periphery structures. In the case in which the circular causality between upstream and downstream firms is focused as agglomeration forces, the present model is fully solved. Thus, we find that (1) the present model displays, at most, three interior steady states, (2) when the asymmetric steady-states exist, they are unstable and (3) location displays hysteresis when the transport costs of intermediate manufactured goods are sufficiently high.