Evolution of production networks and the localisation of firms: evidence from the Thai automotive industry

In this article, we compile a new data set of firms in the Thai automotive industry and discuss the localisation of both automotive parts suppliers and assemblers in Thailand. We first review the factors affecting the development and location of the Thai automotive industry and examine how Thailand came up with the strategy to promote one-ton pickup trucks as the first 'product champion'. We argue that the government played a significant role in creating a 'sizable' domestic market and building the essential infrastructure, resulting in the promotion of dynamic growth and a vibrant productive capacity. Then, applying Duraton and Overman's continuous approach, this paper examines the localisation of automotive firms. Using the spatial distribution of manufacturing establishments as a benchmark, this study finds that all categories of parts suppliers were significantly localised. Moreover, it is revealed that statistically significant localisation takes place only within 150 kilometers with respect to the bilateral distances between suppliers.