The Localization of Interfirm Transaction Relationships
Using a unique dataset of more than 140,000 manufacturing firms in Japan containing information on their suppliers and customers, this paper looks at the physical distances between transaction partners to examine the localization of transaction relationships. We find the following. First, controls for the location of firms and their potential partners, transaction relationships in about 90-95% of the 150 three-digit manufacturing industries can be labelled as localized at distances of 40km or less. This indicates that physical distance is a key factor in firms' choice of transaction partners. Second, based on a counterfactual that controls for the average distance of transaction relationships in the manufacturing sector as a whole, we find that in about 40% of industries transaction relationships are localized at short distances of up to 40km. Third, the extent of industrial localization and the extent of the localization of transaction relationships are positively correlated. However, there are a number of exceptions and we provide potential explanations for these.
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- NAKAJIMA Kentaro & SAITO Yukiko & UESUGI Iichiro, 2013. "Role of Inter-firm Transactions on Industrial Agglomeration: Evidence from Japanese firm-level data," Discussion papers 13021, Research Institute of Economy, Trade and Industry (RIETI).
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"Measuring economic localization: Evidence from Japanese firm-level data,"
Journal of the Japanese and International Economies,
Elsevier, vol. 26(2), pages 201-220.
- NAKAJIMA Kentaro & SAITO Yukiko & UESUGI Iichiro, 2010. "Measuring Economic Localization: Evidence from Japanese firm-level data," Discussion papers 10030, Research Institute of Economy, Trade and Industry (RIETI).
- Nakajima, Kentaro & Saito, Yukiko Umeno & Uesugi, Iichiro, 2011. "Measuring Economic Localization: Evidence from Japanese Firm-level Data," Working Paper Series 10, Center for Interfirm Network, Institute of Economic Research, Hitotsubashi University.
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- Duranton, Gilles & Puga, Diego, 2003. "Microfoundations of Urban Agglomeration Economies," CEPR Discussion Papers 4062, C.E.P.R. Discussion Papers.
- Gilles Duranton & Henry G. Overman, 2005. "Testing for Localization Using Micro-Geographic Data," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 1077-1106.
- Duranton, Gilles & Overman, Henry G, 2002. "Testing for Localization Using Micro-Geographic Data," CEPR Discussion Papers 3379, C.E.P.R. Discussion Papers.
- Duranton, Gilles & Henry G Overman, 2003. "Testing for Localisation Using Micro-Geographic Data," Royal Economic Society Annual Conference 2003 69, Royal Economic Society.
- Gilles Duranton & Henry G. Overman, 2002. "Testing for localisation using micro-geographic data," LSE Research Online Documents on Economics 20071, London School of Economics and Political Science, LSE Library.
- Gilles Duranton & Henry Overman, 2002. "Testing for Localisation Using Micro-Geographic Data," CEP Discussion Papers dp0540, Centre for Economic Performance, LSE.
- Gilles Duranton & Henry G. Overman, 2005. "Testing for localization using micro-geographic data," LSE Research Online Documents on Economics 581, London School of Economics and Political Science, LSE Library.
- Rosenthal, Stuart S. & Strange, William C., 2001. "The Determinants of Agglomeration," Journal of Urban Economics, Elsevier, vol. 50(2), pages 191-229, September. Full references (including those not matched with items on IDEAS)
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