Agglomeration, Backward and Forward Linkages: Evidence from South Korean Investment in China

35 Pages Posted: 17 Feb 2009  

Peter Marcel Debaere

University of Virginia - Darden School of Business; Centre for Economic Policy Research (CEPR)

Joonhyung Lee

University of Texas at Austin - Department of Economics

Myungho Paik

Hanyang University - College of Policy Science

Multiple version iconThere are 2 versions of this paper

Date Written: December 2008

Abstract

With a firm-level dataset, we study the location decision of all South Korean multinationals across China's regions between 1992 and 2004, taking into account spatial aspects. Our conditional logit estimates confirm previous studies that stress the agglomeration effects along industry and along national lines in firms' location choice. In particular, South Korean investors target the place where there are more firms irrespective of their nationality and, at the same time, more affiliates from South Korean multinationals. More importantly, we decompose these agglomeration effects into a pure agglomeration effect and an upstream and downstream (backward and forward) linkage effect. We find that the presence of upstream and downstream South Korean affiliates significantly increases the likelihood that a South Korean multinational invests there. At the same time, however, backward and forward linkages with the companies irrespective of their nationality do not seem to matter. As such, our analysis of investors' location choice brings together two perspectives: (backward and forward) linkages and agglomeration along national lines.

Keywords: agglomeration, multinationals

JEL Classification: F1, F2

Suggested Citation

Debaere, Peter Marcel and Lee, Joonhyung and Paik, Myungho, Agglomeration, Backward and Forward Linkages: Evidence from South Korean Investment in China (December 2008). CEPR Discussion Paper No. DP7079. Available at SSRN: https://ssrn.com/abstract=1344638

Peter Marcel Debaere (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

HOME PAGE: http://www.darden.virginia.edu/html/direc_detail.aspx?styleid=2&id=5794

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Joonhyung Lee

University of Texas at Austin - Department of Economics ( email )

Austin, TX 78712
United States

Myungho Paik

Hanyang University - College of Policy Science ( email )

222 Wangsimni-ro Seongdong-gu
Seoul, 04763
Korea, Republic of (South Korea)

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