Geography Reference
In-Depth Information
growth and scale observations appear to support the Krugman (2007)
“home market effect” theory, whereby firms locate in large markets the
activities which are subject to increasing returns to scale, and the efficiency
gains associated with investing in these localities then allow firms to export
these goods. As we will see in what follows, this argument appears to be
particularly appropriate when we consider FDI investments in China.
Two common features of all of the BRIICS economies are that they are
very large in both area and population and also contain large cities with
extended regional hinterlands. In terms of economic geography, this allows
these countries to exhibit both large home market effects and also large
agglomeration effects. Amongst the BRIICS countries, by far the most
important is China, followed by India, and South and East Asia is, as previ-
ously discussed, the most dynamic macro-region for multinational activity.
The dynamic growth of East Asia predates the dramatic institutional
and technological changes which took place since the end of the 1980s. As
we have already seen in Chapter 6, the 1970s and 1980s witnessed the rapid
rise of the Asian multinational firms. Initially, the growth in East Asia
during this period was driven primarily by the global rise of the Japanese
multinationals. During the 1980s and 1990s this was followed by the
Korean and Taiwanese manufacturing MNEs, and the Hong Kong and
Singaporean service MNEs. These different waves of multinational firms
which emerged from Asian economies have changed the nature of eco-
nomic relations within the East Asia region, as well as those between East
Asia and the rest of the industrialized world. While the other super-regions
of NAFTA and the EU are maintaining their roles, Asia is continuing to
play an increasingly important part in the global economic system. Indeed,
whereas the US and the EU have grown at similar rates since 1970, East
and South Asia has shown over twice the rate of both of these regions
(Fujita 2007a). In the last two decades East Asia has continued on its
dynamic trajectory and by 2005 its growth rate was 8.9 per cent (in South
Asia 8.7 per cent), some 2.7 times the equivalent growth rate for the US
and 6.7 times that of the Eurozone (World Bank 2007). On the whole,
this rapid growth in the East and South Asia region has been the result of
several forces, among which the economic liberalization of China in the
early 1990s, the increasing mutual openness of the ASEAN countries, and
the density and efficiency of global production networks localized in this
macro-region. The various waves of outward FDI from Asian economies,
as well as increasing inflows of FDI from North America and Europe,
have also been facilitated by the enormous growth of bilateral investment
and taxation treaties and by the overall process of intra-area economic
integration.
While it is true that over time Asian economies will generate more of
