The motives for Japanese foreign direct investment in the Southeastern United States

Abstract

PurposeWhereas the USA is still the largest investment destination for Japanese companies, Japan also accounts as the second largest source of investment in the country. The purpose of this paper is to, empirically, examine the detailed motives of Japanese affiliates when investing in the Southeastern USA, adding to previous research at the national level.Design/methodology/approachThis paper uses a qualitative approach based on the interviews of long-term Japanese investors in the manufacturing and wholesale trade industries in the Southeastern USA and applies text analysis to identify their motives.FindingsThe results show that Japanese firms engage in market- and efficiency-seeking foreign direct investment (FDI), and still apply a classic sequence of gradual and incremental market commitments. Market size and growth rate, reducing transaction or transportation costs, and integration within local value chains are the most important to them, whereas competition, creating an export base, lowering tax and accessing skilled labor are of little concern.Practical implicationsThe goal of Japanese FDI in the USA is no longer to bypass tariffs but is still part of a complex industrial network of relations which drives further investment. This result can inform policy makers at the state level about the factors that can drive additional foreign investment, such as the establishment of industrial clusters.Originality/valueThis study offers current insights into the motives of Japanese FDI in two industries.