Japanese Direct Investment and Economic Development Policy

Abstract

The increasing number of Japanese manufacturing plants locating in the United States presents new opportunities for state and local economic development policy. This article compares the location decisions of Japanese start-ups in manufacturing with counterpart domestic industry and concludes that there are substantial distinctions between Japanese and American firms. Except for a few industries, Japanese firms are not locating in those states that are most attractive to counterpart domestic industries, but are more often choosing average-to low-growth states. Interviews with a small sample of Japanese plants and industrial recruiters suggest that Japanese location decisions in many industries are based on a set of intangible considerations that differ from those that are important to domestic firms.