Agglomeration Effects of Inter-Firm Backward and Forward Linkages: Evidence from Japanese Manufacturing Investment in China
Journal of Japanese and International Economics, Vol. 34, 2014
AJRC Working Paper No. 01/2014
34 Pages Posted: 26 Jul 2017
There are 2 versions of this paper
Agglomeration Effects of Inter-Firm Backward and Forward Linkages: Evidence from Japanese Manufacturing Investment in China
Agglomeration Effects of Inter-Firm Backward and Forward Linkages: Evidence from Japanese Manufacturing Investment in China
Date Written: April 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: Suggested Citation