Evolution of production network and localization of firms: evidence from the Thai automotive industry

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Abstract:

In this article, we want to test geographically distribution of firms in the Thai automotive industry over the course of five decades of its industrialisation. To answer our research question, we have compiled a new data set of firms in the Thai automotive industry and discuss the localization of firms based on the concept of global production network and economic geography. We first review the factors affecting the location of the Thai automobile industry. Streamlined industrial policy and infrastructure development from 1970s to 2000 underpin the creation of automotive cluster and agglomeration of firms in the Eastern region of Thailand. Then, we estimate the kernel density of the bilateral distances between parts suppliers and test for localization at two levels; firstly, whether automotive sector is more localized when comparing to manufacturing sector as a whole, and secondly, whether there exists localization/dispersion among sub-categories in the automotive industry. This study found that, when comparing to overall manufacturing sector, firms in the automotive industry as a whole was significantly localized, and their bilateral distance between firms is localized within 150 km. Concurrently, all the categories of automobile parts were also localized.