Agglomeration, productivity, and high-growth firms in the manufacturing sector of South Korea

Abstract

ABSTRACTPrevious empirical studies have highlighted the significant contribution of a small fraction of high-growth firms to job creation in many countries. As a result, local economic development policy has promoted the creation of high-growth firms. Despite the impact of high-growth firms on local employment, few studies have examined the spatial aspect of such firms on a regional scale. This study focuses on the relationship among agglomerations, productivity, and high employment growth in the manufacturing sector of South Korea. Our analysis provides empirical evidence for the mutually positive impact of agglomeration, productivity, and high employment growth in the manufacturing sector of this nation. Results indicate that high-growth firms tend to be more productive, and firms with higher productivity are more likely to experience strong growth in employment. Furthermore, localization, concentration of firms within one industry, reinforces these positive relationships by enhancing productivity that subsequently leads to high employment growth. Our findings imply that spatial policy may play a complementary role in nurturing a greater number of firms with a potential for strong growth in employment.