Determinants of Locational Choice of Manufacturing Firms in the Seoul Region: An Analysis of Survey Results

Abstract

This paper as part of the World Bank research project(RPO 672-91), "An Evaluation of Industrial Location Policies for Urban Deconcentration," presents the results from a survey of establishments conducted to study the locational choice of manufacturing firms in the Seoul region. Using the annual manufacturing surveys compiled by the Korean National Bureau of Statistics(NBS), the location patterns of employment and their changes were extensively analyzed in another paper (Lee, 1985a); this analysis, performed in terms of births, deaths, and relocation of firms, revealed a high degree of employment location dynamics and strong evidence of the spatial decentralization of manufacturing employment in the Seoul region, as briefly described in the next section. In order to explain these observed location patterns, a survey of manufacturing establishments was conducted in the Seoul region using the 1981 NBS manufacturing survey as the sample base. The survey questionnaire was designed to take about one hour to complete and did not require the respondents to look up their accounting books; still the questionnaire contained a large amount of information with over 400 computer readable variables. This paper will present most salient aspects of the survey results which provide the basis for understanding the changing location patterns of manufacturing employment summarized in the next section. The analysis in this paper is descriptive but the underlying theoretical framework is that of the previous studies on Bogota, Colombia (Lee, 1981; 1982a). After a brief overview of the manufacturing employment location patterns in the region, the sampling strategy is briefly described and the sample outcome is summarized. In the rest of the paper, the survey results are presented in three categories of findings: (1) Esta· blishment characteristics, (2) site characteristics, and (3) the factors considered to be important for the respondent's locational choice. These results are contrasted and compared among the sample establishments by establishment size, firm type(i.e., mature firms, births, and movers), and industries studied. (1) The underlying theoretical framework is that a firm of particular type will locate at a site with particular attributes in such a way that the selected location is optimal to the firm in an urban area, in terms of profits, costs, or some other criteria (Lee, 1982a). The establishment characteristics include type of products, production process, building characteristics, lot size, floor space, and skill composition of workers. The site attributes include proximities to product markets and input suppliers, commuting distance, transport modes, the quality and availability of public utilities and municipal services. The survey questionn-aire prepared for this study contains a section on policy instruments used by the Korean government intended to ,influence firms' locational choice, which was absent in the Bogota study. The results on the effectiveness of policy instruments are reported in Lee(1985a).