Debates on Industrial Agglomerations : Contrasting New Economic Geography and the Work of Alfred Weber

The dynamics that lead to the formation of industrial agglomerations have recently caught the attention of economic geographers and business scholars particularly among those who study Japan\u27s vast small businesses. Admittedly, Paul Krugman\u27s work, Geography and Trade (1992) contributed to generate interests among scholars beyond the realm of economic geography. In addition, work by U.S.-based scholars such as Michael Piore, Charles Sabel, Michael Porter and Allen Scott all greatly influenced the debates, which centered around factors that influence the formation and competitiveness of industrial agglomerations. Interests in New Economic Geography have given rise to the actual originality of the debate on industrial agglomerations. Generally, views represented by New Economic Geography include the following set of arguments : 1) increasing returns characterize the growth of regional agglomerations, 2) increasing returns rise out of the Marshallian notion of localization economies (Alfred Marshall, Principles of Economy, 1920), and 3) increasing returns can also be generated by flexible specialization, otherwise known as the post-Fordism regime of accumulation. I argue that the phenomenon of industrial agglomerations today can be better understood by using the framework proposed by Alfred Weber, whose work is more commonly known by economic geographers in Japan. The Marshallian notion of localized external economies can be understood as one model of Weber\u27s location theories, particularly that of pure agglomeration economies. The weakness of Weber\u27s theory lies in its disregard of the concept of increasing returns. However, Hoover (1958) in the US and Nishioka (1971) in Japan have both adopted Weber\u27s framework and introduced a term "income factor, " which resembles Mashall\u27s notion of increasing returns. Thus, I argue that Weber\u27s framework is quite sufficient in explaining emerging factors of industrial agglomerations, rather than adopting a new conceptual framework introduced by the New Economic Geography contestants. Furthermore, I argue that industrial agglomerations can be broadly divided into pre- and post-world War II agglomerations. The pre-war agglomerations can be further categorized into two types; one is represented by those resulting from the industrial revolution, Manchester being the prime example. Weber considers Manchester as an industrial agglomeration that can be best understood as an optimal location defined by transport costs of raw materials (coalmining) and markets. Most large industrial agglomerations of the 19th Century Europe fall into this category. Another form of pre-war agglomerations resulted from industrialization of pre-existing crafts-based traditional industries. This type of agglomerations typically consisted of numerous small workshops and establishments, which were subsequently integrated by regional wholesalers. The presence of wholesalers were often critical in successfully linking these agglomerations with overseas markets, thus transforming the crafts-based industries to export-oriented manufacturing activities with strong vertical and horizontal links among these firms. The famous "Third Italy" falls into this category, as well as Japan\u27s "Jiba Sangyo" or regional-based industries. During the post-war period, two dominant types of agglomerations emerged. As represented by Toyota-City, Japan, one type of postwar agglomerations is based on Toyota\u27s model of flexible specialization, known as Toyotism. Toyotism developed as a result of an attempt to introduce more flexibility into otherwise rigid mass production system, and provided a new framework for an efficient manufacturing system. Industrial organization of Japan\u27s machinery industry has largely been influenced by this system, in part due to its strong relationship to auto industries. The resulting agglomerations of Toyotism is characterized by strong urbanization economies. Furthermore, globalization of production by Japanese indu