Agglomeration Effects of Inter-Firm Backward and Forward Linkages: Evidence from Japanese Manufacturing Investment in China

34 Pages Posted: 7 Jun 2014 Last revised: 8 Oct 2014

Multiple version iconThere are 2 versions of this paper

Date Written: April 1, 2014

Abstract

This paper examines the agglomeration effects of multinational firms on the location decisions of first-time Japanese manufacturing investors in China for the period 1995-2007. This is accomplished by exploiting newly constructed measures of inter-firm backward and forward linkages formed in a home country. The conditional and mixed logit estimates reveal that agglomeration by first-tier suppliers and customers draws subsequent investment into a location. However, such agglomeration effects are not pervasive and do not extend to the second and third tiers. Instead, we find that agglomeration by third-tier suppliers generates a countervailing force, making a location relatively unattractive.

Keywords: Agglomeration; Backward and forward linkages; Location choice of multinational enterprises

JEL Classification: F23; L22; R3

Suggested Citation

Nakajima, Kentaro and Matsuura, Toshiyuki and Yamashita, Nobuaki, Agglomeration Effects of Inter-Firm Backward and Forward Linkages: Evidence from Japanese Manufacturing Investment in China (April 1, 2014). Crawford School Research Paper No. 01/2014. Available at SSRN: https://ssrn.com/abstract=2446640 or http://dx.doi.org/10.2139/ssrn.2446640

Kentaro Nakajima (Contact Author)

Tohoku University ( email )

SKK Building, Katahira 2
Aoba-ku, Sendai, Miyagi 980-8577
Japan

Toshiyuki Matsuura

Keio University ( email )

2-15-45 Mita
Minato-ku
Tokyo, 108-8345
Japan

No contact information is available for Nobuaki Yamashita

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