The automotive industry is considered a source for economic development in both developed and developing countries. However, endogenous firms in developing countries may not reap the positive externalities of entering global production chains due to their technological and knowledge deficiencies. This is particularly noticeable for Japanese production chains that demand high-quality parts and components and favors the procurement from companies from the same business group, limiting the opportunities for local firms. Training may help reduce this gap by transferring both tacit and explicit knowledge. This analysis provides evidence that institutions such as government agencies may affect the transfer of knowledge to local firms at the micro-level via training. The results from qualitative case studies show benefits from a training project carried out by the Japan International Cooperation Agency (jica) in Mexico. Participating firms experienced overall growth and improvements in their quality and productivity indicators, allowing them to obtain certifications, increase their customer base and diversify to new markets. The knowledge acquired was internalized and diffused throughout the firms and in certain cases spilled-over to other production lines and other companies.

Foreign Direct Investment can have positive effects on host countries by generating spillovers to domestic firms and contributing to increases in their productivity. These productivity spillovers 1 can take place within an industry (intraindustry spillovers) and across industries (inter-industry spillovers) as in the case of technology or knowledge transfer to domestic suppliers (backward productivity spillovers) or customers (forward productivity spillovers). Using unpublished economic census data from Mexico's manufacturing sector this study differs from others by comparing interindustry productivity spillovers from Japanese and US FDI. Results show that Japanese FDI increases the productivity of upstream sectors; however these gains seem to be shared only among foreign suppliers, while US FDI does not seem to generate backward productivity spillovers. Results show no presence of forward productivity spillovers.

The present research examines regional characteristics and spatial effects that determine the industrial location decision of Japanese Foreign Direct Investment (jfdi) in Mexico at a state level. Using a unique dataset, the observations showed a concentration of Japanese firms in the center, northeast and northwest regions in Mexico, with presence of a "low-low" type of clustering measured through a local spatial autocorrelation test. Results from different econometric model specifications show that Japanese firms prefer more populous areas with vast labor pools. Also, contrary to previous findings, transportation infrastructure seems to be deterrent for Japanese firm location, which might be due to a preference for greenfield location sites.

The arrival of Japanese investment in the Mexican automotive industry has caused an increase in the economic dynamism of the Bajio region, especially since the entry into force of the Mexico-Japan Economic Partnership Agreement in 2005. Previous research has been conducted from different perspectives explaining the spatial distribution and agglomeration of Japanese enterprises in host countries; however, studies that employ measurements of spatial clustering for Japanese firms are still scarce. For the present research, a unique spatial georeferenced database of Japanese automotive suppliers was created to identify the clustering patterns of firms. The results suggest that Japanese automotive supplier firms in Mexico favor spatial proximity. The use of spatial measurements of concentration provides evidence to further understand the presence of agglomeration of Japanese firms in the automotive industry.

The automotive industry has been considered a source for development because of its impact on employment, knowledge transfer capabilities and backward and forward linkages with other industries. However, only a handful of developing countries have achieved an internationally competitive automotive industry. This might be attributable to the industry requiring not only skilled labor but also a strong supporting industry able to provide from 20,000 to 30,000 parts and components. In an ideal setting, supplier firms and assembly plants work interconnected creating positive externalities to each other, but for developing countries, it has been shown that this is difficult to achieve. The case of Mexico stands out as a country that has successfully attracted major automotive assemblers but has not been able to develop a solid supplier base. Despite the increasing presence of Japanese firms in Mexico, local firms have not been able to enter automotive chains primarily due to the inability to meet technological and quality requirements. This study analyzes specific cases of knowledge transfer to local firms under a training project from the Japan International Cooperation Agency (JICA). The results show improvements in quality and productivity measurements of participating firms. The knowledge acquired through training was internalized and diffused within the firm allowing for industry-specific certifications, market growth, and market diversification.