Abstract
This research examined whether firms that concentrate geographically perform better or worse than their more dispersed counterparts. While belonging to a cluster may have positive externalities for proximate firms, there can also be congestion economies that counterbalance these advantages. Having identified existing ham-producing establishments in the Iberian ham cluster, a sample of 265 firms was selected and it was confirmed that as the number of neighbouring firms increases performance increases. Also, the proximity to larger firms in the same province benefit smaller firms. This positive effect that geographical concentration has on performance is explained by access to valuable natural resources, workers, higher demand, knowledge spillovers, and lower transaction costs, which may help managers and policy-makers in their investment decisions, as well as contributing to the dearth of existing research and its contradictory nature.
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