Firms' location choice based on trading and financing relationship September 26th, 2015 The university of Tokyo Master's course TEIKOKU DATABANK, LTD. Ryo FUKUDA
Preventing accumulation •	Based on NEG model, Location is directed by transportation cost, increasing returns and diversity. Promoting accumulation • Historically transportation costs are decreasing, so population is concentrating to larger cities. • There are many experimental studies. for example: quantity of international trade (Redding and Venables, 2004),Place of FDI(Head and Mayer, 2004), Relocating(Starauss-Kahn and Vives, 2009), ratio of newly opening(Davis and Henderson, 2008)
The main stream of relocation is minute moving. ■Component of relocation (2011-2014) Over 80% of relocations are ending in one municipality.
■ Network of origins and destinations (2011-2014) You can find not only national scale component concentration but also 81.66%  many local focuses.
Some “opposite” relocations are happening. There are so many interaction of relocation. ■ Origin and destination of relocation (2011-2014)
l Long term trend of relocation (1982-2014) On the basis of number of firms, there is not necessarily concentration to larger cities. 1982 1998 2014 To smaller To cities larger cities
• Much of relocating firms are small and medium enterprises, which are often subject to bigger firms. • In fact, there are observed many relocations to the “opposite” direction. • Looking at origin and destination, much of relocating firms are moving locally. It is needed to soften the most suitable location choice. Here I will focus on continuous relationship of firms Trading (buying and selling) Financing (low and high level)
• The database of Teikoku Databank, Ltd. gathered for credit research.
→Here information of 25322 firms, whose all connections are available is used for analysis. I Unit -choice of location of firm is regarded as choice of municipalities. -88 medium industry groups of Teikoku Databank are adopted.
Almost all industries, trend of declining with distance is observed. distance resistance for selling than buying.
Small and medium enterprises get from banks not only money but also information, so proximity is important. 65% of finance service confirms in each division. Finance service has so large distance resistance ■Division of whole country based on main bank network
08 • It is assumed that functions of higher levels of financing are supplied at headquarters of banks. • The location of this function is directed politically and tend to concentrate on a long-term basis. ■The location of head quarters of banks
Apply nested logit model to explain location selection. (Based on method of Strauss-Kahn and Vives 2009) Where to move
Utility for firm i located in m
of where to locate of whether to locate
Xim: variables indicating utility not moving out Yir: variables   indicating utility moving to nest r Zij: variables   indicating utility moving to city j Nr:number of cities included in nest r R:number of all cities
1 1 Two measurement of utility is introduced.
Especially this model contributes to estimation of relocation Population range
- revealed location utility
potential location utility
N
Hitting ratio for Small & medium enterprises is slightly higher than that for large companies. Number of workers potential location utility • revealed location utility N
• Much of relocation of firms are composed of minute or “opposite” movements. • Focusing on continuous relationship such as trading and financing, you can explain choice of relocation more appropriately. • This model is more effective to relocation to estimate relocation to medium-sized cities and of small & medium enterprises.