A Study on the Formation, Sustenance and Development of Industrial Agglomeration

Abstract

This paper explores the origins of the formation of industrial agglomeration to identify strategic trends in establishing new business facilities in regional Japan. The formation of agglomeration is often due to historical backgrounds; however, this study reveals that developing urban infrastructure in advance and leveraging human resources and existing industries unique to the locale can in effect lead to the establishment of new business facilities. This paper also shows corporate strategies capitalizing on the circulative clustering forces (forward linkage effects and backward linkage effects) that arise from the formation of agglomeration is critical for sustaining and developing industrial agglomeration. Considering the ongoing changes in international structures of division of labor, the paper views locating business facilities to a region is to be in part of the global supply chain, with areas in which the region is weak to be aggressively handed off to external economies (industrial outsourcing). Furthermore, the study also shows that promoting innovation and interaction with human capital outside the region are vital to ensure the competitive superiority of specialized industries of the region.