Local Sourcing and Technology Spillovers to Mexican Suppliers: How Important are FDI and Supplier Characteristics?

I present novel direct evidence on the static and dynamic impact of producer firms on local suppliers based on several firm level surveys that I conducted among producer firms and suppliers in Nuevo León, Mexico. I find that the level of use of suppliers does not differ between foreign direct investment (FDI) and Mexican producer firms. Next, I find substantial evidence that FDI firms generate a larger local dynamic impact; foreign‐owned firms apply more pressure on their suppliers to improve and are also significantly more involved in the provision of several types of technological and organisational support. In extension of these findings, I use multivariate analysis to identify characteristics of suppliers and supply linkages that influence the dynamic impact among suppliers. I find that the level of absorptive capacity of suppliers, the size of the technology gap between producer firms and suppliers, and the provision of support by producer firms all enhance the likelihood that suppliers experience a large positive dynamic impact. Importantly, even when I control for the effects of these factors, suppliers of FDI firms are still significantly more likely to experience a large positive impact.     

Agglomeration and Competition among Chinese Cities: An Investigation of Taiwanese High‐Tech Foreign Direct Investment

The purpose of this study was to investigate how Taiwanese high‐tech firms' foreign direct investment (FDI) leads to agglomeration and competition among cities in China. By using social network analysis to analyze 1,111 subsidiaries affiliated with 270 multinational corporations (MNCs) during the years between 1988 and 2006 in 30 major Chinese cities, this study finds that: 1) agglomeration in Chinese cities falls into three primary categories: the hub cluster, the communication‐extended cluster, and the computer‐extended cluster. Among the aforementioned clusters, the hub cluster is the most critical in terms of firm location, and therefore is often a high‐priority investment site for Taiwanese high‐tech firms. 2) Chinese cities fall into four primary groups, or “blocks”: the core block, the coast block, the inland block, and the periphery block; these groups were determined by applying a structural equivalence analysis of which members of each type are in competition with one another. By linking the findings of the urban network characteristics to Chinese regional economic policies, this study provides guidance to aid executives in determining the optimal location for future FDI. Implications and suggestions for host country governments in terms of firms' investment strategies are also discussed.     

The Spatial Dimension of Trade‐ and FDI‐driven Productivity Growth in Chinese Provinces: A Global Cointegration Approach

This paper analyses the major determinants of long‐ and short‐run labour productivity evolution for Chinese provinces between 1978 and 2010. The role played by openness to trade and foreign direct investment (FDI) constitutes the main focus of this analysis. From a methodological perspective, our main contribution is the inclusion of spatial effects into a dynamic error correction modelling framework. The results show that, in addition to domestic factors such as investment intensity and infrastructure use, trade openness and inward FDI also exert a direct impact on labour productivity. Furthermore, the geographical environment has a strong indirect influence on productivity: The more a region is surrounded by high‐productive regions with good infrastructure and linkages to the world economy, the higher are its productivity level and growth rate. The magnitude of these impacts varies by spatial regime (coastal, interior provinces) and time period in focus. Especially in the recent past, trade and FDI activity appear to be increasingly important drivers of regional productivity evolution, both for coastal and interior regions. These findings have important policy implications: In order to fully exploit the benefits from such spillovers, coordinated industrial policies which foster regional complementarities and support the free movement of production factors across regional borders are crucial.     

Maquiladoras and U.S.‐Bound Migration in Central Mexico

Over the past one and a half decades, smaller cities and nonmetropolitan areas in Mexico have attracted manufacturing plants, led by the export manufacturing sector. Maquiladoras in particular are increasingly locating their plants in such places in the “deep interior” Mexico—outside of the border states. Using 1980 and 1990 Mexican census data for 19 growth centers and 27 high‐emigration municipios (counties) in Central Mexico, this paper suggests that foreign‐owned assembly (maquiladora) jobs decentralized significantly over the 1980s, locating closer to emigrant municipios. An examination of 17 emigrant municipios in the industrialized states of Jalisco and Guanajuato found that an emigrant municipio's accessibility to maquiladora jobs, and jobs indirectly related to maquiladora growth, was positively related to its overall employment growth, which was, in turn, negatively related to its U.S. migration rate over the decade. Although the migration reduction inherent in these relationships is relatively small, it could be accelerated by U.S. and Mexican policies giving incentives for more peripheral locations of export‐oriented and other manufacturing.     

On the drivers of UK direct investment in the Spanish regions: A spatial Durbin approach

This paper empirically examines the key factors driving UK direct investment in the Spanish regions over the period 2000–2016 and, consequently, tries to unveil its main motivation. Applying a spatial Durbin panel model to capture spatial linkages, the results point to the existence of complementarity between the FDI received by a region and that of the remaining ones. This outcome, along with a positive and statistically significant spillover effect of market potential, reveals that complex-vertical FDI motivation with agglomeration economies prevails among UK MNEs investing in Spain. Additionally, our findings unveil the role played by some other FDI drivers, such as wages and infrastructure. Furthermore, the paper is unique in decomposing the average direct and spillover effects by region and pairs of regions, so that remarkable differences can be identified. This breakdown has strong significance from a policy perspective since it can guide regional policy makers. In short, our findings point out to the fact that FDI policy should be jointly designed by those regions presenting strong bilateral spillover effects. Thus, greater cooperation among policy makers would be welcome.     

Determinants of entry: Evidence from new manufacturing firms in the U.S

The objective of this paper is to estimate the relationship between agglomeration economies and the birth of new firms in U.S. manufacturing sectors during 2004–2012. I examine the variations in Marshallian factors across MSAs and across counties within MSAs. My findings support the existence of Marshallian agglomeration forces: input sharing, labor market pooling, and knowledge spillovers, with input–output linkages particularly important. I then examine the variations in Marshallian factors across regions and find regional differences are not very strong. In addition, large-sized firms appear to be more responsive to a supplier-customer relationship. Moreover, my empirical results provide evidence that firms in highly concentrated industries react more to input linkage and labor pooling.     

The relationship between foreign direct investment and domestic entrepreneurship: The impact and scale of investments in China

Both entrepreneurship and foreign direct investment (FDI) are frequently identified as being sources of local and regional economic growth. However, the relationship between the two is not always clear, with a negative competition effect and a positive demand effect potentially present. China provides an interesting case to study with its large state-owned sector, combined with a recent history of successfully attracting considerable FDI. This study examines the relationship between self-employment and different elements of foreign influence (FI) at a provincial level. The results imply that foreign investment reduces the level of self-employment, whilst the number of foreign enterprises and foreign exports have positive effects. The results therefore show the importance in considering multiple perspectives in terms of FI. It appears that policies that attract individual large investments suppress the development of domestic enterprise as predicted by the competition effect, but where more foreign enterprises are present, and a cluster starts to develop, a demand effect appears to take over. This means that provincial government policy may need to be more nuanced to avoid economies being highly reliant on a limited number of what might be quite footloose larger foreign employers.     

Firm Networks and Korean Subsidiaries in the United States

ABSTRACT This article examines the role of intra‐, inter‐, and extra‐firm networks in influencing the location and investment of Korean firms and their subsidiaries in the U.S. Based on a survey of Korean subsidiaries in the U.S. in 2004, this article finds that inter‐firm relations with customers and suppliers, as well as intra‐firm relations in the form of parent firms’ knowledge of the U.S. play an important role in locational decision. Korean subsidiaries’ relationships with U.S. places are strongly influenced by home‐based practices that favor hierarchical intra‐firm organization and embedded sociopolitical extra‐firm relationships that emphasize blood, school, and regional ties. Location in U.S. industrial clusters does not increase Korean subsidiaries’ level of autonomy from parent firm's control that could help facilitate the sourcing of local knowledge and resources. Only improved intra‐firm network positionality positively contributes to increased subsidiary autonomy. Overall, the findings indicate that while inter‐firm relations may be important in locational selection among Korean firms, network norms are largely maintained through intra‐firm and, to a lesser extent, extra‐firm relations.     

The Influence of Agglomeration Externalities on Manufacturing Growth Within Indonesian Locations

Differences in agglomeration externalities and industrial regimes between locations generate performance differentials for their localized economic activities. For more than two decades, scholars have debated which externality is dominant for growth and under which regime. This study aims to resolve this debate by analyzing the influence of agglomeration economies on the growth of five‐digit manufacturing sectors and firms for Indonesian cities and regencies between 2000 and 2009. This is investigated employing the recent reconceptualization of variety based on sectoral linkages distinguishing related and unrelated varieties, which allow assessing their idiosyncratic economic roles. The findings support that economic relatedness is the dominant source for expansion of sectors and firms within Indonesian locations. Specialized clusters and competition are inversely related to manufacturing growth, although the latter fosters sectoral employment within Indonesian regencies. Population density and human capital show antithetic effects between cities and regencies due to their distinctive urbanization trajectories and industrial compositions.     

Ever-transient FDI and ever-polarizing regional development: Revisiting conventional theories of regional development in the context of China,Southeast and South Asia

In this new age of globalization, regions attempt to attract foreign direct investment (FDI) in order to achieve regionally balanced development. We revisit existing theories of regional development and FDI by analyzing recent data sets on FDI, employment, and trade in China, Southeast Asia, and South Asia. Using Chinese provincial data in 2004, 2008, and 2013 and applying panel estimations, our econometric results demonstrate that FDI remarkably influenced the concentration of employment in manufacturing, financial, and business services industries within the three Chinese macro-regions. We also find that FDI is ever transient, always moving away from high-cost to low-cost production bases across different regions. This transient nature of FDI is spatially selective and biased, and not able to generate the trickle-down effects to other neighboring regions. That is why FDI recently moved from China to Southeast and South Asia rather than from its coastal to inland regions. Furthermore, we show that this nature of FDI generally leads to polarization development for regions. As a synthesis or extension of the existing theories, we propose a leapfrog polarization pattern and strategy for vast developing countries in considering their regional development strategies.     

Structured regionalism in the Asia‐Pacific: Slow but sure progress

Abstract: Notwithstanding the existence of considerable intra‐regional trade, the Asia‐Pacific region was slow to catch onto the concept and phenomenon of regionalism. Not many regional integration arrangements were created in the region and the ones that were created did not go far. Over the preceding three‐and‐a‐half decades, the high performing Asian economies adopted outward‐oriented strategies, promoting brisk trade expansion trade and foreign investment. Asia‐Pacific regionalism was essentially market‐led and uninstitutionalised. Regional production networks were the consequence of market‐led economic dynamics in the region. Large corporations, including transnationals, contributed to the growth of a pan‐Asian industrialisation process and trade expansion. This scenario underwent a transformation in the 1990s, particularly during the Asian crisis of 1997–98. Conscious economic and monetary co‐operation with institutional support increased considerably. Asia‐Pacific economies are more committed to regionalism – both economically and institutionally – now than ever before.     

The heterogeneity of agglomeration effect: Evidence from Chinese cities

Using annual surveys of industrial firms in China from 1998 to 2007, this paper applies the non‐linear least squares (NLS) method based on a grid search to analyse the effect of city size on firm total factor productivity (TFP). The results show that overall, the agglomeration effects in large cities, but not selection effects, significantly promote improvement in firm TFP. The optimal agglomeration scales of different industries differ as follows: those of capital‐ and technology‐intensive industries are larger than those of labour‐intensive industries. The agglomeration effects are also robust to different spatial areas without considering administrative boundaries. An inverted U‐shaped relationship exists between firm size and agglomeration effects, while the relationship between firm age and agglomeration effects is U‐shaped. State‐owned firms experience weaker agglomeration effects than non‐state‐owned firms. Cities higher in the administrative hierarchy and those with special economic zones have stronger agglomeration effects. However, cities higher in the administrative hierarchy and those with a larger economic development zone index can provide more resources to increase the survival rate of low‐productivity firms; thus, selection effects are not significant in Chinese cities.     

Logistics Services: Global Functions and Global Cities

The services that organise global and regional trade are supplied by multi‐locational, multi‐functional, and information‐intensive firms. However, in much of the urban and regional research these firms are still seen as part of the transportation task, so their urban and regional impacts are expected to be expressed in concentrations of transportation infrastructure. This paper shows that there has been considerable functional and structural change within these services. In effect, they act like producer services and, for many, head offices and regional offices are in global cities, not all of which are major transportation centres. Using data on the location of the head and regional offices of a sample of the largest of these firms, this research shows that high‐ranked global cities, rather than large transportation centres, are a common office location although some firms operate from small cities. When these firms have regional offices overseas, all favour global cities. These results provide some insight on the links between these cities and the service tasks performed by service firms. They also provide grounds to develop a potentially rich research agenda based on analyses of the activities of these understudied firms.     

Global‐local initiatives in FDI: The experience of Shenzhen,China

Abstract: In 2002, China surpassed the USA to become the world's largest foreign investment destination. Many Chinese cities, especially those along the coast, have become hot spots for Foreign Direct Investment (FDI). The urban development of these Chinese cities, as in most market societies, has increasingly depended upon their global connections. However, it is unclear to what degree the governments of these cities are able to influence the decisions of foreign investors. This paper uses Shenzhen city as a case study to examine how multi‐nationals’ spatial and sectoral patterns have been changed over time and to what degree the local government has been able to influence multinationals’ locational and sectoral selection. It is concluded that Shenzhen has managed to create a strategy to maximise its ability to benefit from global economic forces and to attract multinational manufacturers in the locality, and particularly in increasing its target sector of technology‐intensive industry. This case study demonstrates the importance of a strong city government in managing growth and reacting decisively to globalisation.     

Building innovative capacity in regional entrepreneurship and innovation (eco)systems: Startups versus incumbent firms

This article studies how three sets of regional factors—knowledge, agglomeration, and openness—impact and interact differently with startups and incumbent firms in their innovative capacity building. Based on a large dataset of Chinese high-tech firms, regression analysis shows that the speed of growing startup innovative capacity relies positively on regional knowledge stock and localization economies. In addition to regional knowledge stock, incumbent innovative capacity building benefits from urbanization economies and regional openness. Favorable regional factors, including the presence of universities and the clustering of knowledge-intensive peers, also enable startups (but not incumbents) to leverage internal knowledge assets into their innovative capacity. The results suggest that it is not only the access to the external knowledge environment but also proactive endeavors to cross-fertilize between internal and external knowledge that underlie the eco-systemic nature of startup innovative capacity building.     

State Infrastructure and the Geography of Employment

ABSTRACT The effects of state public capital investment on economic growth is an important question that has been the focus of a recent substantial research effort. But the majority of this research has ignored these investments’influence on the intra-state pattern of economic activity. Yet if external agglomeration economies are important determinants of growth, then investments may indirectly affect growth by fostering or discouraging agglomeration. This paper discusses the effect of state infrastructure investments on the distribution of employment within states and the implications of these spatial effects for aggregate state employment growth. Preliminary empirical results suggest that state infrastructure investments tend to redistribute growth from areas of dense employment to other parts of the state. This redistribution may diminish agglomeration benefits offered by cities, which has the potential to reduce state growth. The paper concludes with a discussion of implications of the work for research and policy.     

Foreign direct investment flows to Mexican states: A study of the automobile industry, 2004–2014

This study examines the subnational flow in foreign direct investment (FDI) to Mexican states, with a focus on the finished vehicle industry. Although prior studies have examined subnational FDI in Mexico, research on the automobile sector has been scant. Utilizing a framework associated with the theory of asset specificity, we examine the influence of human capital and labor conditions, infrastructure, subnational policies, and security. The study employs a data set on finished vehicle FDI across 31 states and the Federal district for the period of 2004–2014. We adopt a two‐part model. The first part, which includes all states and the Federal district, is estimated with pooled logistic and Firth logistic regressions. In the second part, we examine variation in levels of FDI among states selected for investment with pooled ordinary least squares with panel‐corrected and Driscoll Kraay standard errors. Labor conditions are significant for both state selection and levels of FDI, but education is influential only in the selection stage. In addition, states with trunk rail lines linked to the U.S. border are more likely to be selected and receive higher FDI. After controlling for these influences, murder and homicide rates, and state development have no significant effects.     

The Role of Information Density in Infrastructure Investment

The twentieth century witnessed an extraordinary flow of institutional investment into urban infrastructure. Notwithstanding this, the demand for infrastructure projects exceeds supply of skills and capital. With this disconnect as a backdrop we develop a model of information flow to examine how financial assets are transacted over time and space. Specifically, we build on conceptualisations of “information content” from Clark and O'Connor ( 1997 ) to propose a way of theorising “information density”. We apply this specifically to infrastructure investment and find four ways in which infrastructure investment is highly dense. This relates to asset‐level definitions in infrastructure, opacity with respect to how products are securitised, high variance in investment performance, and high relational and investment expertise. We draw on a large qualitative sample of 53 in‐depth interviews, which we validate with quantitative data, to support our findings.     

The formation of agricultural e‐commerce clusters: A case from China

Agricultural e‐commerce clusters are new phenomena that have emerged in rural China. In examining the case of Shuyang County in Jiangsu Province, this paper puts forward an integrated model revealing the formation mechanism of agricultural e‐commerce clusters. The paper shows that the formation of agricultural e‐commerce clusters involves four processes of technology introduction, technology diffusion, quality crisis, and industrial agglomeration based on elements such as industry bases, e‐commerce platforms, network facilities, logistics services, entrepreneurial talent, local government, and market demand. Rural social networks and imitation behaviors promote technology diffusion by reducing the cost of technology introduction, and industrial agglomeration is found in the economies showing a deepening of labor divisions and geographic agglomeration. Throughout the formation process, a quality crisis may occur due to a race to the bottom and the opportunistic behaviors of local farmers. This work suggests that regional e‐commerce development is a systematic project. Governments of developing countries should not only realize the positive impacts of e‐commerce for the development of the agricultural industry but also recognize the premise and logic of how e‐commerce can play a prominent role.