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Location Proximity and Productivity Spillovers: The Case of Korean Manufacturing Plants

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  • Backhoon Song

    (Sungshin Women's University Republic of Korea)

Abstract

Knowledge spillovers have been recognized as an important source of innovation and economic growth in both industry and firm-level data. A firm may reap benefits by locating near other firms in the same geographical region. In this paper, we examine how physical proximity influences a firm's future productivity and its survival possibility. Our results indicate that a firm located in a region with a higher median total factor productivity (TFP) gains higher productivity from other firms in the same region. One possible explanation is that such a firm has more opportunity to access superior external knowledge and to produce more new ideas. Our results also indicate these productivity-enhancing characteristics do not seem to be industry-specific. Finally, we find that high productivity firms are the only significant sources of knowledge spillovers, suggesting that firms benefit most from combining their internal knowledge with the external knowledge of neighboring firms with high TFP on average. © 2015 The Earth Institute at Columbia University and the Massachusetts Institute of Technology

Suggested Citation

  • Backhoon Song, 2015. "Location Proximity and Productivity Spillovers: The Case of Korean Manufacturing Plants," Asian Economic Papers, MIT Press, vol. 14(1), pages 104-118, Winter/Sp.
    • Handle: RePEc:tpr:asiaec:v:14:y:2015:i:1:p:104-118
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    More about this item

    Keywords

    knowledge; spillovers; innovation; economic growth; physical proximity; future; productivity; TFP;
    All these keywords.

    JEL classification:

    • L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L00 - Industrial Organization - - General - - - General
    • M00 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General - - - General
    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General
    • O35 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Social Innovation
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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