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

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  • Yamashita, Nobuaki
  • Matsuura, Toshiyuki
  • Nakajima, Kentaro

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.

Suggested Citation

  • Yamashita, Nobuaki & Matsuura, Toshiyuki & Nakajima, Kentaro, 2014. "Agglomeration effects of inter-firm backward and forward linkages: Evidence from Japanese manufacturing investment in China," Journal of the Japanese and International Economies, Elsevier, vol. 34(C), pages 24-41.
    • Handle: RePEc:eee:jjieco:v:34:y:2014:i:c:p:24-41
    DOI: 10.1016/j.jjie.2014.04.001
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    1. Evert Meijers & Martijn Burger & Masahisa Fujita & Nobuaki Hamaguchi, 2016. "Supply chain internationalization in East Asia: Inclusiveness and risks," Papers in Regional Science, Wiley Blackwell, vol. 95(1), pages 81-100, March.
    2. Jean-Pascal Bassino & Pablo Jensen & Matteo Morini, 2017. "Network analysis of Japanese global business using quasi-exhaustive micro-data for Japanese overseas subsidiaries," Papers 1707.05699, arXiv.org.
    3. Ono, Arito & Miyakawa, Daisuke & Hosono, Kaoru & Uchida, Hirofumi & Uchino, Taisuke & Uesugi, Iichiro, 2014. "Transaction Partners and Firm Relocation Choice: Evidence from the Tohoku Earthquake," HIT-REFINED Working Paper Series 11, Institute of Economic Research, Hitotsubashi University.
    4. MATSUURA Toshiyuki, 2015. "Impact of Extensive and Intensive Margins of FDI on Corporate Domestic Performance: Evidence from Japanese automobile parts suppliers," Discussion papers 15032, Research Institute of Economy, Trade and Industry (RIETI).
    5. Toshiyuki Matsuura, 2017. "Impact of Extensive and Intensive Margins of Foreign Direct Investment on Domestic Corporate Performance: Evidence from Japanese Automobile Parts Suppliers," Asian Economic Papers, MIT Press, vol. 16(2), pages 187-209, Summer.
    6. ITOH Ryo & NAKAJIMA Kentaro, 2014. "Impact of Supply Chain Network Structure on FDI: Theory and evidence," Discussion papers 14027, Research Institute of Economy, Trade and Industry (RIETI).
    7. Ryo Itoh & Kentaro Nakajima, 2021. "Do sourcing networks make firms global? Microlevel evidence from firm-to-firm transaction networks," The Japanese Economic Review, Springer, vol. 72(1), pages 65-96, January.
    8. Suminori Tokunaga & Maria Ikegawa, 2019. "Global supply chain, vertical and horizontal agglomerations, and location of final and intermediate goods production sites for Japanese MNFs in East Asia: evidence from the Japanese Electronics and Au," Asia-Pacific Journal of Regional Science, Springer, vol. 3(3), pages 911-953, October.
    9. Itoh, Ryo, 2014. "Tax discrimination against inter-firm networks," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 25-35.
    10. HAYAKAWA Kazunobu & MATSUURA Toshiyuki, 2017. "Overseas Production Expansion and Domestic Transaction Networks," Discussion papers 17085, Research Institute of Economy, Trade and Industry (RIETI).

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    More about this item

    Keywords

    Agglomeration; Backward and forward linkages; Location choice of multinational enterprises;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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