Tech firm births and agglomeration economies: (un)related variety, specialization, and spatial externalities

Abstract

This paper examined the multi-scalar effects of different types of agglomeration economies, namely, specialization, related variety, unrelated variety, and urbanization economies, on tech firm births in Salt Lake County, Utah, U.S. We found that these agglomeration economies affected tech firm births simultaneously, but their spatial externalities differed across various scales. Specialization and related variety operated at all scales including neighborhood scale while urbanization economies only worked at city-wide scale. Unrelated variety did not affect tech firm births at all scales. Specialization externalities appeared more pronounced at neighborhood scale and its spatial scope was larger than that of related variety. These findings partially explain the recent trend of multiscale clusters of the tech industry and suggest that spatial externalities of agglomeration economies should be understood in different types with a multi-scalar framework. Policymakers and urban planners should highlight this to maintain sustainable development and secure urban success. These findings also imply that distinguishing related and unrelated variety is necessary at neighborhood scale and should not be ignored in local development planning.