Business Networks and Suppliers' Locational Choice

Abstract

In this paper I examine the circumstances under which proximity is important to assemblers and suppliers in the South Korean auto industry. In order to understand suppliers' locational calculus, I analyze the power relations between the national state, assemblers as the chaebol, and suppliers and offer a multifaceted causal analysis of suppliers' spatial patterns. I show that only more dedicated suppliers producing either bulky or modular components tend to be co-located with their assembly plants for economic benefits resulting from geographical proximity. I also show that suppliers who transact with several assemblers are relatively more powerful in their markets and thus freer in their location decisions than are dedicated suppliers and prefer remaining in the Seoul metropolitan area, the major agglomeration of R&D activities, markets, and government organizations. These findings challenge the assembler-centric spatial logic of the business network approach, which has the hypothesis of co-location between assemblers and suppliers.