On which table should the foreign key be defined?

For simple relational databases the foreign key is usually defined on one table only:

• For join tables (linking tables), put the foreign keys on the join table itself.
• For lookup tables, don't put the foreign key on them, put it on the other (main) table.

Flat file vs database

Flat file

• Easy to set up, only have to consider local file permissions
• Easy to implement in an ad-hoc way, ideal for a prototype
• Plain text for very simple things like a list
• JSON/YAML/Perl for complex data structures
• Doesn't work when the app is load balanced across multiple servers
• Not automatically backed up
• Amazon S3 is relatively expensive
• Have to make your own model

Database

• Requires up-front schema design - more work, but forces you to consider design of data 
• You can put business logic in the ResultSet models
• Requires an instance to be provisioned
• Easy cross-referencing of data
• Works when the app is load balanced across multiple servers
• Backup-as-a-service (i.e. replication)
• Amazon RDS is cheaper than S3
• Get the model for free with ORM

Conclusion

For production services that have redundancy (load balanced), always use a database unless the overhead of setting one up for the first time is considered too high for the business.