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Market Potential and the Location of Japanese Firms in the European Union

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  • Keith Head

    (Sauder - Sauder School of Business [British Columbia] - UBC - University of British Columbia [Canada])

  • Thierry Mayer

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper develops a theoretical model of location choice under imperfect competition to formalize the notion that firms prefer to locate "where the markets are." The profitability of a location depends on a term that weights demand in all locations by accessibility. Using a sample of Japanese firms' choices of regions within European countries, we compare the theoretically derived measure of market potential with the standard form used by geographers. Our results show that market potential matters for location choice but cannot account entirely for the tendency of firms in the same industry to agglomerate.

Suggested Citation

  • Keith Head & Thierry Mayer, 2004. "Market Potential and the Location of Japanese Firms in the European Union," Sciences Po Economics Publications (main) hal-01020551, HAL.
    • Handle: RePEc:hal:spmain:hal-01020551
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-01020551v1
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    References listed on IDEAS

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