Using large-scale panel data at the business unit level in South Korea, this study analyzes how the presence of FDI firms in industrial complexes impacts the productivity of domestic firms through vertical spillovers. Due to industrial agglomeration, FDI firms in industrial complexes are expected to engage more in vertical interactions with local firms and to procure a higher proportion of inputs locally compared to those outside the complexes. Therefore, the backward linkage effects of FDI firms in industrial complexes on domestic firms are anticipated to be more significant than FDI firms not operating in these complexes. To test this hypothesis, it constructs an indicator for the backward linkage effects of FDI and analyzes its relationship with the total factor productivity (TFP) of Korean manufacturing establishments.

This study finds that FDI firms located in industrial complexes exhibit significant positive backward linkage effects on the productivity of domestic firms. In contrast, the backward linkage effects of FDI firms outside the complexes are significantly lower and sometimes negative when domestic firm productivity is measured by value added per employee. These results support the hypothesis that, at least from 2010 to 2019, clustering into industrial complexes positively affects the productivity of domestic firms through the backward linkage effects of FDI firms.

Preface
Executive Summary

Chapter 1 Introduction

Chapter 2 FDI and Industrial Complexes: Current Status and Characteristics
　Section 1 Current Status and Characteristics of FDI
　Section 2 Current Status and Characteristics of Industrial Complexes

Chapter 3 Analyzing the Productivity Spillovers of FDI
　Section 1 Data
　Section 2 Analytical Model
　Section 3 Results

Chapter 4 Conclusion

References
Appendix
ABSTRACT