Relocations are determined by firms' relationships with financing institutions: A paper based on network data for Japanese firms

Both theoretical and empirical research studies the factors influencing firms' location choices. This paper presents a new viewpoint by considering relationship continuity to explain small-scale relocations and relocations of small and medium-sized enterprises (SMEs), which represent the majority of firms. The influences of firms' relationships with financing institutions are studied using a two-stage nested logit model. Consequently, the positive effect of relationships on location choices is revealed and the factors preventing firms from moving are described. The model is valid for estimating relocations to medium-sized cities, and the influences on shrinking firms as opposed to expanding firms are especially strong.