Agglomeration effects of inter-firm backward and forward linkages: Evidence from Japanese manufacturing investment in China |
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| Institution: | 1. Islamic Azad University, Science & Research Branch, Tehran, Iran;2. Department of Information Technology Management, Tarbiat Modares University, Tehran, Iran;1. Faculty of Economics, University of Tokyo, Hongo 7-3-1, Bunkyo-ku, Tokyo113-0033, Japan;2. Canon Institute for Global Studies, Japan;3. Institute of Economic Research, Kyoto University, Yoshida-Honmachi, Sakyo-ku, Kyoto 606-8501, Japan;1. University of Bayreuth, Department of Law and Economics, Universitätsstr. 30, 95447 Bayreuth, Germany;2. TU Dresden, Faculty of Business and Economics, Helmholtzstr. 10, 01069 Dresden, Germany;3. University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE), Universitätsstr. 1, 40225 Düsseldorf, Germany |
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| 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. |
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| Keywords: | Agglomeration Backward and forward linkages Location choice of multinational enterprises |
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