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Agglomeration, backward and forward linkages: evidence from South Korean investment in China

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  • Peter Debaere
  • Joonhyung Lee
  • Myungho Paik

Abstract

With a firm‐level data set, we study the location decision of South Korean multinationals across China's regions. Our conditional logit estimates confirm agglomeration effects along industry and along national lines. We add an upstream and downstream (backward and forward) linkage effect. We find that the presence of upstream and downstream South Korean affiliates significantly increases the likelihood that a South Korean multinational invests in a particular region. However, linkages that do not differentiate by nationality do not seem to matter much. As such, our analysis of investors' location choice brings together two perspectives: linkages and agglomeration along national lines. A partir d'une base de données au niveau de l'entreprise, on étudie la localisation de firmes plurinationales sud‐coréennes dans les régions de la Chine. Les résultats d'une analyse de type logit confirment qu'il existe des effets d'agglomération tant dans l'axe industriel que national. Quand on ajoute les effets en amont et en aval, on découvre que la présence d'affiliés sud‐coréens en amont et en aval accroît de manière significative la probabilité qu'une firme plurinationale sud‐coréenne investisse dans une région particulière. Cependant les liens qui ne discriminent pas selon l'axe de la nationalité ne semblent pas avoir grande importance. L'analyse des décisions de localisation d'investissement synthétise deux perspectives : liens et agglomération selon l'axe de la nationalité.

Suggested Citation

  • Peter Debaere & Joonhyung Lee & Myungho Paik, 2010. "Agglomeration, backward and forward linkages: evidence from South Korean investment in China," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 43(2), pages 520-546, May.
    • Handle: RePEc:wly:canjec:v:43:y:2010:i:2:p:520-546
    DOI: 10.1111/j.1540-5982.2010.01582.x
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    2. Yi Che & Julan Du & Yi Lu & Zhigang Tao, 2023. "Institutional difference and foreign direct investment location choice: Evidence from China," Review of Development Economics, Wiley Blackwell, vol. 27(3), pages 1934-1956, August.
    3. Khanindra Ch. Das & Mantu Kumar Mahalik, 2021. "Assessment of Overseas Subsidiary Survival in Chinese Provinces: A Longitudinal Study of Indian Multinationals," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 54(2), pages 190-207, June.
    4. Kenichi Kashiwagi & Erina Iwasaki, 2024. "Industrial linkage, vertical integration and firm performance: evidence from textile and garment industry in Egypt," Quality & Quantity: International Journal of Methodology, Springer, vol. 58(1), pages 803-828, February.
    5. 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.
    6. Sunghoon Chung, 2012. "Environmental Regulation and the Pattern of Outward FDI: An Empirical Assessment of the Pollution Haven Hypothesis," Departmental Working Papers 1203, Southern Methodist University, Department of Economics.
    7. Peng, Fei & Peng, Langchuan & Wang, Zheng, 2021. "How do VAT reforms in the service sectors impact TFP in the manufacturing sector: Firm-level evidence from China," Economic Modelling, Elsevier, vol. 99(C).
    8. Debaere, Peter & Lee, Hongshik & Lee, Joonhyung, 2013. "Language, ethnicity and intrafirm trade," Journal of Development Economics, Elsevier, vol. 103(C), pages 244-253.
    9. Alfaro, Laura & Chen, Maggie Xiaoyang, 2014. "The global agglomeration of multinational firms," Journal of International Economics, Elsevier, vol. 94(2), pages 263-276.
    10. Turgel, I. D. & Bozhko, L. L. & Zinovieva, E. G., 2019. "Cluster Approach to Organization of Special Economic Zones in Russia and Kazakhstan," R-Economy, Ural Federal University, Graduate School of Economics and Management, vol. 5(2), pages 71-78.
    11. Ahmad Y. Areiqat & Hanan Ibrahim, 2021. "The Impact of Turning Jordan into an Economic Free Zone on the Flow of Foreign Investments," International Journal of Business and Management, Canadian Center of Science and Education, vol. 13(12), pages 1-61, July.
    12. Che, Yi & Du, Julan & Lu, Yi & Tao, Zhigang, 2017. "Institutional Difference and FDI Location Choice: Evidence from China," MPRA Paper 77158, University Library of Munich, Germany.

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