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

  • Nobuaki Yamashita
  • Toshiyuki Matsuura
  • Kentaro Nakajima

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.

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Paper provided by Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University in its series AJRC Working Papers with number 1401.

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Length: 34 pages
Date of creation: 2014
Date of revision:
Handle: RePEc:csg:ajrcwp:1401
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