International relocation and production geography in the European automobile components sector: the case of Spain

Abstract

This article, based on the various approaches to location theory, analyses relocation processes in the Spanish automobile components industry in order to explain the importance of internal factors at both corporate and production plant levels. While acknowledging that location advantages play a relevant role, we show that changes in production geography can, to a great extent, be explained by corporate strategies, other decision-making mechanisms and firms’ characteristics. The results obtained from an empirical study during the period 2001–2008 show that the search for lower labour costs and corporate restructuring in order to achieve global production efficiency are the main factors determining relocation in the Spanish sector. These processes are facilitated by the operational flexibility of the multinational firms that dominate the sector. Lean supply and technological requirements are the main barriers to such processes of production plant mobility. From the point of view of practical relevance, the article shows that these logistic and technological determinants should be considered by managers in their relocation decisions not only in terms of cost efficiency but also in terms of the risks involved in relocation processes. Any relocation project must include measures to mitigate such risks.