Post-Fordist scholars witnessing the rapid growth of some cities and regions in the advanced economies have revived the importance of proximity, arguing that a new post- Fordist production system encourages geographical proximity. More recent studies on clusters, however, attest that spatial clustering or proximity is not a necessary outcome of lean manufacturing applications (Ansari and Modarress, 1990; Appold, 1995; Ettlinger, 1992; Gertler, 1995; Greis and Kasarda, 1997; Mair, 1992; Nishiguchi, 1994; Sadler, 1994). They argue that the quality of transportation infrastructure in com- bination with the capability of management systems ultimately matters rather than proximity among firms in ensuring predictable on-time arrival of goods. Although these recent studies show that post-Fordist spatial logics are limited, they focus mainly on questioning whether proximity is an emerging spatial trend or not. An important question still remains unanswered: under what circumstances does proximity matter? In this paper, I examine under which conditions proximity is important to assem- blers and suppliers in the South Korean auto industry. I take the locations of large assemblers as given and attempt to explain the spatial array of suppliers and their location decisions as a function of the characteristics and evolution of business network relations. I show that proximity does not prevail in the Korean auto industry and, furthermore, that most causes of proximity can be explained by traditional location theory. I provide evidence for the complexity of proximity and distance in the South Korean auto industry location patterns. I offer a multifaceted causal analysis of suppliers' spatial patterns. I show that suppliers who transact with several assemblers are relatively more powerful in their markets and thus freer in their location decisions than are dedicated suppliers and prefer remaining in the Seoul metropolitan area, the major agglomeration of R&D activities, markets, and government organizations. I also show that the number of suppliers who work with several assemblers have been able to grow because of the national state's industrial policy in the South Korean auto industry. My findings challenge the assembler-centric spatial logic of transaction cost theories and the business network approaches, which posit a dualism between geographical proximity associated with trust-based network relations and spatial Business networks and suppliers' locational choice Yong-Sook Lee Urban Studies Research Programme, Asian Research Institute, National University of Singapore, Shaw Foundation Building, 5 Arts Link, Singapore 117570; e-mail: arileeys@nus.edu.sg Received 15 September 2001; in revised form 30 December 2001 Environment and Planning A 2002, volume 34, pages 1001 ^ 1020 Abstract. In this paper I examine the circumstances under which proximity is important to assem- blers and suppliers in the South Korean auto industry. In order to understand suppliers' locational calculus, I analyze the power relations between the national state, assemblers as the chaebol, and suppliers and offer a multifaceted causal analysis of suppliers' spatial patterns. I show that only more dedicated suppliers producing either bulky or modular components tend to be co-located with their assembly plants for economic benefits resulting from geographical proximity. I also show that suppliers who transact with several assemblers are relatively more powerful in their markets and thus freer in their location decisions than are dedicated suppliers and prefer remaining in the Seoul metropolitan area, the major agglomeration of R&D activities, markets, and government organizations. These findings challenge the assembler-centric spatial logic of the business network approach, which has the hypothesis of co-location between assemblers and suppliers. DOI:10.1068/a34181