A study on the impact of soft location factors in the relocation of service and manufacturing firms

Abstract

This paper empirically studied relocation factors for manufacturing and service firms in the Seoul Metropolitan Area. The purpose of this study is to identify the influence not only of traditional firm location factors, but also of quality of life factors. A firm's location decision is an assertive action (behaviour) to maximize profit that may have a large ripple effect on the regional economy and society. This study used a binary logit model to analyse location choice factors during firm relocations. As of December 2011, the number of firms registered with the Korea Chamber of Commerce and Industry was 117,157. Of these firms, 36,598 were selected. The firms’ locations could be tracked because their names and owners did not change from December 2006 to December 2012. Of the selected firms, 8328 (22.8%) relocated during this period. It can be considered that 4.6% of all firms relocate in a year. A geographic information system database was built using location addresses of the 8328 firms. This study exhibited a trend that manufacturing firms moved from cities to suburbs, where transport and industry conditions were more favourable. By contrast, firms in higher-order industries with high-added value moved to city centres, where living conditions were more favourable. This trend suggests that quality of life factors have become more important in firm location decisions. This study is expected to be used to understand changes in firm locations and relocations, and to help make industrial policies for drawing firms.