Foreign Automotive Clusters and State Cluster Development Policies in the Southern States of the United States

Type de publication:

Conference Paper


Gerpisa colloquium, Paris (2013)


After the American Civil War, the North enjoyed rapid economic development and industrialization, whilst the South continued to rely heavily upon primary industry, and remained largely a rural economy that stagnated. In an effort to trigger economic growth, several southern states developed policies to attract investment from the North, but it was not until the 1950s that a state developed a specific goal of attracting inward investment from overseas. Many of the earliest investments by foreigners in the South were in the textiles and textile machinery industry. Beginning in the 1980s, the South has attracted large auto assembly plants from the major auto producers of Japan, Germany and South Korea. States have developed new laws and policies in their effort to secure these investments, and in their effort to develop an automotive cluster.
This paper examines the automotive industry in the southern United States (hereafter called “the South”) to identify the nature and magnitude of an auto cluster(s) in the region. The importance of clusters in economic development has been long recognized by economists, and in recent decades Michael Porter has further popularized this concept. Porter’s diamond of competitiveness for regional competitive advantage addresses the important characteristics of clusters and provides a suitable framework for consideration of cluster development and evolution. A deep-rooted cluster is robust and offers unique advantages to the regional economy and its members. Other clusters, often characterized by a dependence upon foreign investors, are often much less embedded and exist in the absence of strong indigenous players. Clusters of this type may indeed offer benefits to the host economy and to participants, but these clusters are relatively vulnerable and are prone to de-clustering when there is deterioration in location-specific advantages.
The South is home to several large assembly plants of the major German, Japanese and South Korean auto producers (see Table 1). This paper examines the locational choice of these companies, and compares and contrasts the product scope, market scope and value added scope of each facility. The primary focus of this paper considers the impact of these assembly plants upon subsequent flows of inward investment by their existing or potential suppliers. It examines the plant location decision of these suppliers and compares and contrasts their decision-making and negotiations with contending states. The paper further examines the nature of foreign direct investment by auto suppliers in the South especially, but considers too those suppliers based in other locations in North America, as well as the role of domestic suppliers to the foreign auto assembly plants.
Another factor of importance is the supply chain for each major assembly plant in the South, thus the paper provides an overview of all auto investments in the South by state, and by country-of-origin, examining the product scope, market scope, and value-added scope of each foreign auto component supplier in the South. Although intra-state competition can be intense to secure inward investment, attention is also afforded to collaborative state initiatives to enhance an auto cluster that comprises locations in more than one state.
Finally, the paper explores the differences in supplier strategies based upon their country of origin, as well as the relative importance of their largest customer(s) thus addressing the extent to which key OEMs from each major country rely upon suppliers from their own country-of-origin, and the extent to which the population of suppliers from several countries of origin breeds switching from traditional suppliers to new suppliers based in a different country. As a result, this paper also addresses the changing nature of inward investment policy in the region and in each state as they seek to develop an automotive cluster in the South. Given that there are positive economic benefits that spillover from one state to another, it is significant that a more collaborative approach is developing as states combine their efforts to bolster the region’s auto investments. Hence, the nature of the automotive cluster(s) in the South to determine their composition, and hence its degree of embeddedness, becomes an important strategic factor.

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