Agglomeration economies and location choice of Korean manufacturers within the United States

Authors: Lee, Ki-Dong1; Hwang, Seok-Joon2; Lee, Min-hwan3

Source: Applied Economics, Volume 44, Number 2, 1 January 2012 , pp. 189-200(12)

Publisher: Routledge, part of the Taylor & Francis Group

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Employing the micro data for 1997–2004, we investigate the location decision of Korean-affiliated manufacturing investments in the United States. The conditional logit estimates confirm that although industry-specific Korean agglomeration and domestic agglomeration play an important role, the Foreign Direct Investment (FDI) location is more sensitively affected by the interstate difference in endowment conditions than by the same nationality agglomeration. Both business service and intermediate good agglomeration are main determinants of FDI location. Furthermore, estimation results show substantial change in the location pattern after recovery from the Asian financial crisis. We find quite different patterns of location decision across industry groups; dispersion forces work greater than the agglomeration force in the consumer goods industry, forward linkages with US upstream firms can be seen in the assembly and processing industry, and typical follow-the-leader pattern mixed with market potential effect by Korean immigrants is seen in the basic material manufacturing industry.

Document Type: Research Article


Affiliations: 1: Department of International Commerce,Keimyung University, Dalseo-Gu,Daegu 704-701, South Korea 2: Department of Economics,Keimyung University, Dalseo-Gu,Daegu 704-701, South Korea 3: Department of Economics,Pusan National University, Geumjeong-Gu,Busan 609-735, South Korea

Publication date: January 1, 2012

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