The Role of Public Policies, Agglomeration and the Keiretsu in the Spatial Distribution of Japanese Automotive Production Networks in Mexico’s Bajio Region 2016-2020

Abstract

Previous literature regarding the spatial distribution of Japanese automotive production networks has focused on regional factors such as demand, production costs, agglomeration, public policies and Keiretsu-type organization. Factors pertaining to agglomeration have been previously researched using mesoeconomic techniques that fail to capture the truly spatial nature in the data. Similarly, identifying the role of public policies has been regarded as a complicated task since most negotiations are conducted behind closed doors with limited records of such offerings. This data limitation is also observed when the role of the Keiretsu is studied. Japanese firms do not publicly inform about their affiliation to a Keiretsu group and when information is available, it is reported for the case of firms established in Japan and not generalizable to affiliate firms abroad. This thesis attempts to fill-in these gaps in the literature by employing quantitative and qualitative research methods and using data at a national, regional and local level. Data was gathered from public and private sources and through field work to create unique databases and analyze the three factors and the role they play in the location of Japanese automotive supplier firms in Mexico. The main results of this study confirm that Japanese firms agglomerate and form clusters when establishing productive networks in the host country, this form of organization in turn may ease the transition to the new location by lowering transaction costs and benefiting from economies of scale. Also, the results showed that local governments compete to attract FDI projects and offer fiscal incentives and tax breaks when hiring local workforce. These public policies seem to be focused on securing the establishment of the Japanese firms in the first stage and the promotion of employment in a later stage. Results from qualitative interviews also revealed the role that industrial parks play in the establishment of firms in municipalities. Industrial parks offer adequate infrastructure and closeness to major clients. In this sense, it was highlighted that when Japanese firms choose a location and an industrial park, other firms follow even if they directly compete among each other, giving further support to the agglomeration hypothesis and showing the cooperative nature of Japanese firms. Finally, the Keiretsu was analyzed using Social Network Analysis. The results highlight that major automotive assembler companies such as Toyota, Honda and Mazda are topologically close and share ties among them. Assemblers share supplying firms among them and maintain exclusive relationships with a relatively low number of firms. This type of production preference allows firms to benefit from shared supplier development on one hand and allows for suppliers to not be tied to one client on the other. The Keiretsu system that was analyzed is observed as a complicated, intertwined and cooperative network in the Bajio region