How Nations Succeed by Murat A. Yülek

Author:Murat A. Yülek
Language: eng
Format: epub
ISBN: 9789811305689
Publisher: Springer Singapore

5.5 Linkages of the Manufacturing Industry

The concept of forward and backward linkages of a firm or a sector put forward by the economist Alfred Hirschman is well known. Along the value chain, a firm (or a sector) receives raw or intermediate inputs from other firms (and sectors). Forward linkages refer to the firms (or sectors) receiving inputs from the firm (or sector) in question; backward linkages are firms/sectors that supply inputs to the firm. The forward and backward linkages determine the impact on sectoral production following an increase in the final demand; depending on the international supply chain, the impact may go beyond the national borders. Figure 5.8 presents the estimations of backward linkages for an increase in the final demand for automobiles in Japan for an equivalent of 10 billion yens.7

Fig. 5.8Automobile manufacturing: backward linkages and value-added generation. (Source: Inomata 2013)

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