Agglomeration Economies in the Us and Location Choices of Research Laboratories: New Evidence from Manufacturing Industries in Japan

Abstract

The purpose of this paper is to examine an influence on the location choice of Japanese research laboratories in the US by clusters. In some details, in order to examine the presence of agglomeration economies, we show that whether Japanese research laboratories in the US are located in industry agglomeration or the area where local knowledge stock is large.

There are two findings in our empirical work as follows; firstly, the extents of both local knowledge stock of each state in the US and Japanese firm-based local knowledge stock of each state have influenced on the location choice of Japanese research laboratories in the US. This finding represents that Japanese firms choose the location of research laboratories for two reasons: to expect agglomeration effects and to locate near Japanese rival firms to avoid a risk that Japanese firms are unable to procure agglomeration benefits even though they locate in the area where local knowledge stock is large. Secondly, the extents of both industry agglomeration in the US and Japanese firm-based industry agglomeration have not been related to the location choice of Japanese research laboratories in the US. In short, Japanese firms are willing to locate in the area where innovative activities are clustering, not where industrial activities are clustering. This result indicates that the impact of agglomeration economies on the firm's R&D activity is greater in the area where local knowledge stock is large than in industry agglomeration.

Keywords: local knowledge stocks, industry agglomeration, location choices of laboratories, NBER Patent Citations Data, agglomeration economies, a conditional logit model, overseas R&D by Japanese firms, support motive

JEL Classification: F23, H32, L10, O3, R12, R3