Spillovers through Supply Chains: How large plant openings affect local supplier firms

         
Author Name KAWAKUBO Takafumi (Fellow (Specially Appointed), RIETI) / SUZUKI Takafumi (Aichi Shukutoku University)
Creation Date/NO. September 2025 25-E-083
Research Project Future Challenge and Empirical Analysis of Corporate Taxation
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Abstract

This study examines how becoming a supplier to a newly established large-scale plant influences the performance of incumbent small plants. Exploiting detailed plant-level data, records of new large-plant openings, and supply chain information, we construct a quasi-experimental setting based on the spatial distribution of new entrants. Our event-study estimates show that while local supplier plants benefit significantly—both statistically and economically—from large-scale plants, non-supplier plants in the same region face negative impacts, likely due to intensified competition spurred by the newly-contracted suppliers. The results underscore that such entries create “winners and losers” not only across different regions but also within the same locality. From a policy perspective, these insights highlight the importance of facilitating effective partnerships between large-scale entrants and local suppliers, as well as offering support to disadvantaged non-supplier firms. Overall, our findings illuminate the nuanced local economic consequences of large-scale plant entries and offer guidance for future industrial and regional policies.