Plant Location Decisions Research Articles

Access to Workers or Employers? An Intra-Urban Analysis of Plant Location Decisions

This analysis attributes economies of agglomeration to either labor market pooling or employer-based productivity spillovers by distinguishing the effect of access to workers, measured by place-of-residence, from the effect of access to employers. New establishment location choices serve as a measure of productivity advantages, while census tract level data on access to same-industry employment, other-industry employment, and specialized workers, as well as metropolitan area fixed effects, measure sources of agglomeration and other locational characteristics. The four industries included are selected so that each relies on a workforce with a specialized occupation that is identifiable by place-of-residence, and that productivity and cost advantages are the primary drivers of location choice. The results show that both access to specialized workers and access to same-industry employers contribute to economies of agglomeration at an intra-urban spatial scale, and that the magnitude of the worker effect is large relative to employer-based productivity spillovers.

The effect of spatial variables on the economic and environmental performance of bioenergy production chains

The aim of this paper is to understand the impacts of spatial variables on the performance of bioenergy production chains (BPCs). Even though the strong debates continue on the use of first generation biomass for bioenergy production, many countries continue to utilize it as an alternative energy source. Several studies have been carried out on biomass transformation efficiency, on environmental impacts of using crop in biofuel production, and on its negative effects on increasing food prices. However, less attention has been paid to the role played by the spatial variables on the performance measures of BPCs. In this paper, we analyse how three spatial variables, i.e. cultivation area size, land dispersion, and accessibility to cultivation areas, can affect the performance of energy-balanced BPC, which produces its own electric and thermal energy demand. The chain is represented as a network of processes, where all inputs and outputs are geographically referred and analysed in a theoretical case example. We propose an enterprise input–output (EIO) model, which can be used as an accounting tool to compute the main materials and energy flows-related costs and as a planning tool to evaluate the chain performance in different scenarios. Finally, the proposed model is applied to an actual case study, to investigate the opportunity to establish a sunflower-based BPC in Apulia region (Italy) and to assess its performance. Results show that higher land dispersion degree and less area accessibility levels reduce the economic and environmental performance of the BPCs. The construction of the energy-balanced chain reduces the negative environmental impacts caused by fossil energy use in the processes of the BPC. Managerial implications can also be obtained from actual case study about the biodiesel plant location decisions.

Spatial Heterogeneity in Environmental Regulation Enforcement and the Firm Location Decision among U.S. Counties

We estimate a negative binomial model with fixed effects to examine the impact of spatial differences in environmental regulation on manufacturing capital flows. Using a newly available data set, we find that stricter air quality standards with respect to ozone deter births of polluting plants, suggesting that heterogeneity in regulatory standards may create a spatial browning process. We also find that spatial differences in environmental regulation do not play a role in the location decision of plants that are not pollution-intensive. Finally, we also examine the effects on capital flows with respect to three other criteria air pollutants regulated under the amendments to the Clean Air Act. We find that births of particulates-intensive manufacturers are deterred by stricter regulation with respect to particulates emissions but the location decisions of plants that emit high levels of carbon monoxide and sulfur dioxide are not significantly affected by increased regulation of the respective criteria pollutant.

Effects of Socio-Economic and Input-Related Factors on Polluting Plants' Location Decisions

Abstract Many environmental justice studies argue that firms choose to locate waste sites or polluting plants disproportionately in minority or poor communities. However, it is not uncommon for these studies to match site or plant location to contemporaneous socioeconomic characteristics instead of to characteristics at the time of siting. While this may provide important information on disproportionate impacts currently faced by these communities, it does not describe the relationship at the time of siting. Also, variables that are important to a plant's location decision – i.e., production and transportation costs – are often not included. Without controlling for such variables, it is difficult to evaluate the relative importance of socioeconomic characteristics in a firm's initial location decision. This paper examines the role of community socioeconomic characteristics at the time of siting in the location decisions of manufacturing plants while controlling for other location-relevant factors such as input costs.When plant location is matched to current socioeconomic characteristics, results are consistent with what the environmental justice literature predicts: race is significant and positively related to plant location, while income is significant and negatively related to plant location. When plant location is matched to socioeconomic characteristics at the time of siting, empirical results suggest that race is no longer significant, though income is still significant and negatively related to plant location. Poverty rates are sometimes significant but act as a deterrent to plant location. Variables traditionally considered in the firm location literature – such as land and labor costs, the quality of labor, and distance to rail – are significant. The presence of pre-existing TRI plants in a neighborhood and average plant size are also significant.

The effects of air quality regulations on the location decisions of pollution-intensive manufacturing plants

This research examines the effects of the 1977 Clean Air Act Amendments (CAAA) on the location decisions of pollution-intensive manufacturing plants. We develop a panel data set to analyze plant births of polluting manufacturers over time as a function county-level attainment status of the federal standard for ozone pollution. We find that more stringent county-level environmental regulations impact pollution-intensive capital flows through deterring new plant births. We also find that the impact of stricter regulations varies by pollution-intensity of manufacturers, with results suggesting that federal guidelines have a greater impact on high pollution intensive manufacturers than more moderate polluters.

Factors Affecting Location Decisions of Food Processing Plants

Factors Affecting Location Decisions of Food Processing Plants

Location decisions of Japanese new manufacturing plants in China: a discrete-choice analysis

This paper adopts a conditional logit model to empirically examine the location choices of Japanese greenfield manufacturing foreign direct investment among Chinese provinces. It is hypothesized that its location decisions in China would be determined by the provinces’ market sizes, infrastructure capacities, labor, land, and energy costs, agglomeration effects, labor quality, and policy incentives. A Hausman–McFadden test is conducted to test whether the independence from irrelevant alternatives assumption of the conditional logit model is violated.

Technological Asymmetries and Strategic Plant Location: The Case of Export-Platform Foreign Direct Investment

We consider the plant location decision of a multinational corporation (MNC), which has the option to invest in a more or in a less technologically lagging country, and which aims to use its foreign plant as an export-platform. We show that the plant location decision of the MNC depends on whether the host country firms can export, and on whether they are able to compete in the product market. We also show that a conflict of interest does not necessarily arise between the plant location decision of the MNC and the preferences of the host countries' governments.

Comparing Location Decisions of Domestic and Foreign Auto Supplier Plants

Plant locations in the U.S. auto industry have been moving southward for some time now. This paper utilizes a comprehensive dataset of the U.S. auto industry and focuses on plant location decisions of auto supplier plants that were opened less than 15 years ago in the U.S. We find that agglomeration continues to matter: suppliers want to be close to each other as well as to their assembly plant customers. We also find evidence of differences in location factors for domestic and foreign suppliers. Foreign suppliers exhibit a stronger preference to be near highways, other foreign suppliers and foreign assembly plants. That helps explain the different location patterns observed for these two groups within the auto region.

An Investigation of Telecommunications as a Plan Location Decision Criterion

The concept of site selection has received extensive attention throughout history. Although plant location decision issues have always been important to US manufacturing firms, the impact of global competition has increased recognition of their importance. To successfully compete globally, manufacturers must have an effective global supply chain infrastructure, which requires effective communications. However, plant location strategies change over time, because of the dynamic nature of the variables that determine a location decision. This study was conducted to extend the location decision taxonomy by including telecommunications. The research included a specification of telecommunications attributes that impact site selection, the importance of telecommunications as a location decision criterion and the differences in location decision criteria between domestic (US) and foreign sites. The telecommunications-specific attributes determined in this study include: telecommunications infrastructure, cost, reliability, bandwidth, personnel, local and US government restrictions, and local and US government regulations on exporting and importing data. The conclusions of this study not only present evidence that telecommunications is influencing decision-makers in site selection, but also provides a list of criteria that are critical to site selection.

Firm- and Country-Level Trade-offs and Contingencies in the Evaluation of Foreign Investment: The Semiconductor Industry, 1994–2002

This paper examines the joint impact of firm- and country-level factors on the international plant location decisions of semiconductor firms from 1994–2002. We find that these factors interact to influence the location decisions of firms investing abroad in a given host country. Firms with more advanced technological capabilities are more likely to make investments in countries with greater technological sophistication but not in politically hazardous countries where they face greater expropriation hazards. Firms with less-advanced technology are more willing to accept a trade-off between country-level political hazards and technological sophistication. Firms also trade off own- versus other-firm experience as sources of critical knowledge regarding the foreign investment environment.

Is foreign direct investment attracted to ‘knowledge creators’?

The effect of ‘knowledge creators’ on location patterns of new foreign plants entering the USA from 1986 to 1993 is analysed. The empirical results from a conditional logit model suggest a link exists between knowledge bases, measured by patent counts, and the location decisions of foreign plants. In the limit, these results imply that a 1% increase in patent counts is associated with an increase in the probability of attracting a new foreign plant by as much as 1.874%.

Facilitating Development: The Role of Business Groups

A defining characteristic of developing countries is the inadequacy of basic services normally required to support organized economic activity. One way in which the private sector acts to facilitate development is through investments orchestrated by agglomerations of firms called business groups. Such groups dominate the landscape of virtually all developing countries. Our study of plant location decisions in India shows that group-affiliates are more likely to (profitably) locate in less-developed states than unaffiliated firms; the magnitude of this “group effect” is large and significant. Furthermore, this result is stronger for more recent location decisions that are less likely to have been driven by political economy considerations. We suggest that this is because the scale and scope of groups, and the de facto property rights enforcement within groups in environments where legal enforcement is lacking, permit them to overcome some of the difficulties that impair production in underdeveloped regions.

Finnish consumers’ attitudes towards multifunctional agriculture

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Supply chain competitiveness: measuring the impact of location factors, uncertainty and manufacturing practices

Supply chain performance is impacted by several factors beginning with the plant location decision. Existing literature has tended to predominantly emphasize quantitative factors such as transport costs, exchange rates, labour rates and taxes. While there are existing models that capture qualitative variables, there is limited research linking these variables with measures of the firm’s operational competitiveness. In this paper, we propose a framework that includes qualitative factors concerning plant location decisions, supply chain uncertainty, and manufacturing practices. We argue that a joint consideration of such factors helps explain supply chain competitiveness. Data from a large sample study is used to test the model. Our results largely support the assertion that there is a significant relationship between qualitative plant location factors such as labour, infrastructure, business environment, political stability, proximity to markets, proximity to suppliers, key competitors’ location, supply chain uncertainty and broad manufacturing practices and the operational competitiveness of supply chains as measured by quality, flexibility, inventory turnover and responsiveness.

What attracts high performance factories? Management culture and regional advantage

National data and case studies are used to test the importance of different types of management practices on the location decisions of new manufacturing plants. We find that plants that adopt high performance management practices and cultures rely on different criteria when making their location decisions, and also weigh standard location criteria differently, than those plants that are managed in more traditional ways. Omitting management culture from studies of business location may result in biased estimates of the importance of various traditional location factors. By more accurately specifying location models for manufacturing plants with high performance management cultures, this study provides some additional insights for regional development policy.

RELATIVE IMPORTANCE OF PLANT LOCATION FACTORS: A CROSS NATIONAL COMPARISON BETWEEN SINGAPORE AND MALAYSIA

The strategic implications of plant location in the global context of supply chain management have received limited attention in the literature. Both quantitative factors (transport costs, exchange rates, labor rates, and taxes) and qualitative factors (infrastructure, availability of skilled labor) have been identified as being important in making plant location decisions. Few studies have offered prescriptive models that isolate the relative influence of strategic factors in locating in one country as opposed to another. In this paper, logistic regression analysis is used to predict which strategic location factors are significant for firms locating in Singapore in comparison to firms that locate in Malaysia.

Informational aspects of foreign direct investment and the multinational firm

This paper explores the informational role of plant location decisions for the multinational enterprise. When information about costs is incomplete, the location of a plant will be chosen not only for its impact on actual production costs, but also for its impact on the perception of costs as held by foreign rivals. We show that the desire to transmit cost information can itself give rise to the multinational firm, and characterize the country-specific and firm-specific attributes that are most likely to yield such multinational activity. Hence, the informational role of plant location decisions is a potentially important element in understanding the behavior of the multinational firm.

Education, trade and investment liberalizations

Empirical evidence suggests a two-way causality between skilled labor and inward direct investment. I construct a general equilibrium model that allows for endogenous firm and plant-location decisions and the endogenous accumulation of skilled labor. I examine the effect of an education subsidy when trade is liberalized and investment is restricted and vice versa. For an initially skilled-labor-scarce country, I show that an education subsidy under investment liberalization can jump the economy to a high-level equilibrium, and that it may be possible to remove the subsidy completely and remain at the superior equilibrium.

Environmental Regulations and New Plant Location Decisions: Evidence from a Meta‐Analysis

Stricter environmental regulations are often opposed on the grounds that they will alter equilibrium capital flows. Empirical evidence in this area remains largely unresolved, mainly due to the quite disparate results found in the literature. This paper takes a positive look at the relationship between new manufacturing plant location decisions and environmental regulations by examining data from 11 studies that provide more than 365 observations. One major result from our meta‐analysis is that methodological considerations play a critical role in shaping the body of received estimates. Our empirical estimates also lend insights into future research that is necessary before any robust conclusions can be made regarding the effects of environmental regulations on capital flows.