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

Nobuaki Yamashita, Toshiyuki Matsuura, Kentaro Nakajima

Research output: Contribution to journalArticlepeer-review

13 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)24-41
Number of pages18
JournalJournal of the Japanese and International Economies
Volume34
DOIs
Publication statusPublished - 2014 Dec

Keywords

  • Agglomeration
  • Backward and forward linkages
  • Location choice of multinational enterprises

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Political Science and International Relations

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