Agglomeration effects of inter-from backward and forward linkages: evidence from Japanese manufacturing investment in China

Vol: 
01/2014
Author name: 
Kentaro Nakajima, Toshiyuki Matsuura, Nobuaki Yamashita
Year: 
2014
Month: 
April
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.

Publication file: 

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