Monitoring Spatial Changes in Manufacturing Firms in Seoul Metropolitan Area Using Firm Life Cycle and Locational Factors

Youngsoo An and Li Wan
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Youngsoo An: The Department of Urban Planning and Design, The University of Seoul, Seoul 02504, Korea
Li Wan: The Department of Land Economy, The University of Cambridge, 19 Silver Street, Cambridge CB3 9EP, UK

Sustainability, 2019, vol. 11, issue 14, 1-22

Abstract: This paper diagnoses the development of the manufacturing industry in the Seoul Metropolitan Area (SMA) using portfolio and regression analyses. Following the life-cycle perspective, four types of spatial changes of firms have been identified, namely firm formation, inflow, outflow, and dissolution, which are applied to analyze the manufacturing development in SMA. For portfolio analysis, we propose the Net Formation Index and Net Inflow Index to measure the spatial changes of firms at the city level. The two indices facilitate horizontal comparison among cities in SMA in terms of firm growth from new opening and relocation. Using spatial regression analysis, we identify significant location factors that contribute to firm change patterns. Our tests show that a high level of industrial specialization (measured by location quotient) has a dual effect. On the one hand, high level specialization attracts new or inflow firms, particularly in the light and high-tech manufacturing industries. On the other hand, it leads to an increased number of closed or outflow firms, plausibly due to increased competition among local firms. The proposed methods can be applied to diagnose industrial development in clusters of inter-connected cities and design policy tools to boost the local industry.

Keywords: firm’s life cycle; locational factors; manufacturing firms; monitoring spatial changes (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
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