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

  • Nobuaki Yamashita

    (La Trobe University, Melbourne)

  • Toshiyuki Matsuura

    (Keio University, Tokyo)

  • Kentaro Nakajima

    (Tohoku University, Sendai)

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 Keio/Kyoto Joint Global COE Program in its series Keio/Kyoto Joint Global COE Discussion Paper Series with number 2012-042.

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Length: 24 pages
Date of creation: Mar 2013
Date of revision:
Handle: RePEc:kei:dpaper:2012-042
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