The spatial process of Japanese foreign direct investment in finance, insurance, and real estate in the United States, 1980-1990

This study focuses on the spatial processes of Japanese foreign direct investment (FDI) in finance, insurance, and real estate (FIRE) in the United States during 1980-1990. The center of the investment had gradually moved away from the Japanese traditional investment region, the West, to the core area of the United States, especially the Mid-Atlantic and the Great Lakes regions. The fast growth of Japanese investment in the booming Southeast also occurred.I propose a model to interpret these dynamic changes of the spatial patterns. The model links three evolutionary stages of Japanese investment (initial, growing, and mature), their market targets and spatial patterns at different evolutionary stages. Three locational determinants of Japanese FDI in FIRE industries, markets, proximity to large metropolitan areas, and governmental promotion and incentives were identified by previous studies. The market target of Japanese FIRE investment will expand from other Japanese investment in the initial stage to include the American domestic markets in the growing stage, and even international market in the mature stage. The spatial pattern of the investment will change from staying with other Japanese investment to follow the American domestic markets, and further to the places with more exposures to the international market. The diffusion of Japanese FIRE investment in the United States will take a cascade pattern, from larger cities and to smaller cities and towns. The Southeast, which has been actively pursuing the Japanese investment, had received larger share of the investment.The statistical analysis reveals that the Japanese FDI in FIRE was still in an early stage, characterized by the strong locational correlation between its FIRE investment and other investment. Meanwhile, Japanese FIRE investment had also started to target on the American domestic market, evidenced by the increasingly stronger location correlation between Japanese FIRE investment and the American domestic FIRE investment. Even though the systematic data at urban level is not available, it is found that the areas with longer Japanese FIRE investment had more subsidiaries in smaller cities. The validity of the model in the mature stage remains untested because Japanese FIRE investment was still in an early stage.