Agglomeration Advantages Research Articles

A search for an industrial cluster in Japanese manufacturing sector: evidence from a location survey

This paper explores the result of a questionnaire survey on the location decision of new manufacturing plants from 1997 to 2004 and discovers an industrial cluster in Japan. More specifically, performing an exploratory factor analysis across 22 manufacturing industries, this study firstly summarizes agglomeration advantages as a latent location factor, secondly specifies the regional share of industries that emphasize the agglomeration factor, and thirdly identifies the location of industrial cluster based on the regional share. The major finding is that there exists such agglomeration factor, by which most Marshallian location advantages are represented, and the main industrial cluster consists of high-tech industries and spread over the suburb area between Tokyo and Aichi prefectures, where are most manufacturing capacity is concentrated.

Regional Patterns of Intangible Capital, Agglomeration Effects and Localised Spillovers in Germany

We use a large micro-dataset to assess the importance of intangible capital - organisation, R&D and ICT capital - for the economic performance of establishments and regions in Germany. In 2003 self-produced intangible capital accounted for more than one fifth of the total capital stock of establishments. More than half of the intangible capital is R&D capital. This high proportion is mainly due to a relatively strong and research-intensive manufacturing sector in Germany. At the regional level, we find descriptive evidence for a positive relationship between intangible capital and the economic performance of regions. This is true both for the level of economic activities and for growth. The results of cross-sectional regressions for the years from 1999 to 2003 indicate that doubling the intangible capital intensity of establishments increases the average wage levels by one percent. Regarding the regional economic environment of establishments, we find that the substantial net advantages of agglomeration have more to do with broad knowledge and diversity than with regional clustering and specialisation. Separate regressions for the wage levels of non-intangible workers show very similar results. These workers can share the rents of the activities of intangible workers. Thus, intangible capital generates positive externalities not only at the regional level, but also at the level of establishments.

Competition for FDI with Vintage Investment and Agglomeration Advantages

Countries compete for FDI investment, whereas stocks of FDI generate agglomeration benefits and are potentially subject to extortionary taxation. We study the interaction between these aspects in a simple vintage capital framework with discrete time and an infinite horizon, focussing on Markov perfect equilibrium. We show that the equilibrium taxation destabilizes agglomeration advantages. The agglomeration advantage is valuable, but is exploited in the short run. The tax revenue in the equilibrium is substantial, and higher on old FDI than on new FDI, even though countries are not allowed to use discriminatory taxation. If countries can provide fiscal incentives for attracting firms, this stabilizes existing agglomeration advantages, but may erode the fiscal revenue in the equilibrium.

The economics of abundance: coal and cotton in Lancashire and the world

As a subterranean, highly elastic energy source, coal played a vital role in the cotton industry revolution. Coal was also vital to Lancashire's primacy in this revolution, because it was necessary both to the original accumulation of agglomeration economies before the steam age and to their reinforcement during the steam age. In no other part of the world was the cotton industry situated on a coalfield, and the response of other parts of the world cotton industry to Lancashire's agglomeration advantages was dispersal in search of cheap water and/or labour power. Lancashire coal helped to shape the global pattern of cotton production.

Potencial para implantação da produção mais limpa em sistemas locais de produção: o polo joalheiro de São José do Rio Preto

Os sistemas locais de produção (SLP) têm sido foco de políticas e ações nas esferas internacional e nacional voltadas ao desenvolvimento da competitividade da indústria local com base na dinamização de vantagens de aglomeração. Tais ações e políticas apontam os SLP como vetor de dinamismo econômico que favorece o desenvolvimento local, ressaltando o papel de micro e pequenas empresas (MPE) organizadas em aglomerações industriais. Porém, verifica-se que, nas análises e nas ações de estruturação e promoção dessas aglomerações, a dimensão ambiental recebe tratamento tangencial. Coloca-se, então, a questão sobre como contemplar a referida dimensão no entendimento e no desenvolvimento dos SLP, incorporando o objetivo de prevenir e reduzir os impactos ambientais negativos oriundos das atividades dessas aglomerações. O artigo tem como objetivo analisar as oportunidades para a integração da dimensão ambiental em um grupo de empresas do Polo Joalheiro de São José do Rio Preto-SP, o segundo maior do Estado de São Paulo em confecção de joias em ouro, participantes de um projeto de competitividade executado pelo Serviço Brasileiro de Apoio às Micro e Pequenas Empresas (SEBRAE). A análise proposta adota a produção mais limpa (P + L) como abordagem e ferramenta de gestão ambiental particularmente adequada para empresas de menor porte e podendo convergir com esforços de inovação tecnológica para, desse modo, constituir uma alternativa para a efetivação de melhoria no desempenho ambiental. Por meio de uma pesquisa qualitativa de caráter exploratório, verificou-se que os esforços de atualização tecnológica realizados no polo joalheiro, analisados com base na P + L, permitem a obtenção de benefícios ambientais, econômicos e de saúde e segurança ocupacional a partir da redução no consumo de matérias-primas, água e energia, bem como na geração de resíduos e nas emissões. São identificadas oportunidades para incorporar a dimensão ambiental em políticas e ações para a promoção de SLP, levando em conta as especificidades e a dinâmica tecnológica setorial em MPE.

Das Finanzzentrum – ein Cluster?

The financial centre - a cluster? A multiscalar approach and evidence from a case study of Frankfurt/Main: The cluster approach has recently been applied in various studies of financial centres, for example of London or Frankfurt. Its current use in financial geography, however, seems to be more metaphorical than analytical. This paper firstly discusses specific sectoral characteristics which make it difficult to simply apply a concept which was developed for the industrial sector to the financial economy. Secondly, value networks in the production processes of financial products indicate that only certain parts of the production process, i.e. knowledge-based, non-repetitive transactions in the network, require local proximities. Following Gordon/McCann in their reasoning on industrial clusters, it is argued that the cluster approach to financial centres calls for a multi-scalar perspective combining the juridical national territory, the advantages of a large urban agglomeration, and, finally, the network externalities of a district within the urban agglomeration, i.e. the “financial district”. This is demonstrated using the example of the financial centre of Frankfurt/RhineMain, a term which stands for the larger urban agglomeration.

Competition for FDI with vintage investment and agglomeration advantages

Countries compete for new FDI investment, whereas stocks of FDI generate agglomeration benefits and are potentially subject to extortionary taxation. We study the interaction between these aspects in a simple vintage capital framework with discrete time and an infinite horizon, focussing on Markov perfect equilibrium. We show that the equilibrium taxation destabilizes agglomeration advantages. The agglomeration advantage is valuable, but is exploited in the short run. The tax revenue in the equilibrium is substantial, and higher on “old” FDI than on “new” FDI, even though countries are not allowed to use discriminatory taxation. If countries can provide fiscal incentives for attracting new firms, this stabilizes existing agglomeration advantages, but may erode the fiscal revenue in the equilibrium.

Re‐visiting Indonesian cases for cluster realism

PurposeThe purpose of this paper is to use case study evidence to explain that enterprise agglomeration in itself may not advantage business development. Agglomeration has the potential to bring enterprise advantage but whether this occurs depends on additional supportive conditions.Design/methodology/approachThe paper re‐examines case studies of Indonesia clusters from a more critical perspective than adopted in their original presentation. This critical perspective follows a realist assessment of agglomeration in which advantages depend on specific business environments.FindingsFive processes are identified that limited the advantage obtained from agglomeration: internal segmentation; enterprise independence; technological pooling; excessive competition and linkage dependencies. Three attributes that influence whether agglomeration assists business and regional development: enterprise diversification, entry barriers and cluster scale.Research limitations/implicationsThe paper is limited by its reliance on previously completed case studies rather than a set of purpose‐designed case studies.Practical implicationsBusiness promotion agencies should be aware that not all enterprise clusters have an equal likelihood of sustaining economic growth.Originality/valueThe combined evidence from previously published case studies of Indonesian cluster experiences adds to the understanding of the conditions required for agglomeration advantages to be realised.

Localized Technological Knowledge: Pecuniary Knowledge Externalities and Appropriability

Recent advances in the economics of knowledge highlight the key role of pecuniary knowledge externalities in explaining the system dynamics of total factor productivity growth. When non-exhaustible technological knowledge is an input both in the production of new goods and of further knowledge, and the acquisition of external knowledge, as a non-disposable input in the production of new knowledge, is not free, pecuniary externalities, as opposed to technological externalities, provide an important clue to understanding the key role of knowledge governance mechanisms in assessing the rate of growth of total factor productivity and economic systems at large. The negative effects upon appropriability limit the advantages of agglomeration.

Spatial Concentration: focus on Garment Firms in Minas Gerais

This article aims to identify and analyze the aspects that drove the spatial concentration of garment firms in Prado, a block located in Belo Horizonte, Brazil. It also aims to evaluate the competition relationships that firms developed between each other in order to benefit from agglomeration advantages. In this sense, the selection of this research topic is based on two reasons. Firstly, it looks at the potential benefits from the spatial concentration of firms. Secondly, in terms of the local economy, the selected industry is highly representative. Based on 15 interviews with entrepreneurs and individuals from the firms’ local association, it is suggested that the factors that are considered traditional by the literature influenced the localization decision of the firms. In addition, it is found that the cooperative relationships are still incipient. Therefore, the potential competitive advantages based on spatial concentration have not yet accrued to the firms. Finally, the results show that the deterioration of a neighboring cluster benefited the agglomeration of firms in Prado. Key-words: Cluster. Garment firms. Competition relationships interfirms.

Creating High‐Technology Growth: High‐Tech Employment Growth in U.S. Metropolitan Areas, 1988–1998*

Objective. Growth in the share of high‐technology employment is critical to discussions of the postindustrial transition. Do new state and local technology policies create growth in the share of high‐technology employment? This article examines this question along with the effects of location and agglomeration advantages, identifying sources of qualitative growth in the U.S. economy.Methods. We examine change in the share of high‐technology employment in metropolitan statistical areas (MSAs) in the United States between 1988 and 1998. High‐technology employment is measured from the BLS Current Employment Statistics Survey. The scale of state and local technology policies are measured from a comprehensive survey of state and local technology programs. A generalized linear model (GLM) estimates the effects of technology policies along with regional proximity, location, and agglomeration factors.Results. Technology grant and loan programs and research parks have direct effects on the share of high‐technology employment, along with private venture capital firms and military R&D. Research parks also magnify the effects of private venture capital firms, while public venture programs and technology development policies compensate for agglomeration deficits. Rapid population growth provides a more conducive context for these policies but does not directly influence growth in the share of high‐technology jobs.Conclusion. State and local technology policies compensate for and magnify the effects of agglomeration advantages, indicating that state and local government can play a strategic role in high‐technology development.

The effect of congestion and agglomeration on multifactor productivity growth in Dutch regions

It is well known that labour productivity growth in Europe is slowing down, against an increasing growth rate in the US. The Netherlands is one of the countries in Europe with the lowest growth rates of productivity. This article looks at this phenomenon from a regional perspective and presents the results of a growth accounting exercise applied to regional industry data of The Netherlands between 1995 and 2002. We find that slow productivity growth in The Netherlands is particularly situated in the economic core regions and is caused by slow multifactor productivity (mfp) growth. A substantial part of this slow mfp-growth can be explained by the fact that positive agglomeration advantages are overruled by negative congestion effects caused by traffic jams.

Do High Technology Policies Work? High Technology Industry Employment Growth in U.S. Metropolitan Areas, 1988-1998

Since the 1970s, federal, state and local governments have launched an array of new high technology development programs. Researchers and policy-makers disagree about the relative merits of these policies. We address the effects of seven of these policies on high tech industry employment growth in metropolitan statistical areas in the United States between 1988 and 1998. A conditional change score design shows that technology grant/loan programs and technology research parks have direct effects net of location and agglomeration factors. Five of seven programs positively interact with existing agglomeration advantages to create growth in high technology industry employment. Technology development programs compensate for deficits in agglomeration resources. Our results suggest that high-technology development can be planned by designing programs that magnify existing local growth advantages.

A model for residential supply

The release of agricultural land for urban use by landowners, the development of this land into urbanized land lots by land developers and the construction of buildings by housing developers is a complex multistage process which we study and model as a chain of sub-markets. The theoretical complexity comes from the interaction between supply agents at each stage, the existence of a natural monopoly associated with a location externality such as agglomeration, access and neighborhood advantages and the spatial context of this linked market. Analytical models are derived for each supplier agent type, assuming they behave stochastically. We apply the maximum entropy framework to generate models consistent with discrete choice theory. The cases of perfect and imperfect competition are considered, along with constrained and unconstrained supply. The usual economic properties required for deterministic models are demonstrated to hold here. The calibration of parameters is discussed and equilibrium equations for quantity and prices are derived. Thus, this new model can be conceived as a key tool in an overall land use model, providing a detailed and economically consistent description of the supply side. With this enhancement, a land use equilibrium is established on more solid ground.

Dynamics of Agglomeration and Relational Assets

Since the late 1980s, concerned with arguments about the arrival of the “post-fordist” epoch, studies of agglomeration blossomed in the West. In the 1980s, most studies showed that the advantages of agglomeration are external economies, which provide static efficiency with economic actors. In the 1990s, in contrast, the dynamic aspect of agglomeration from the viewpoint of innovation and learning was widely discussed. The latter studies had a common understanding of various relationships within the regional effects of dynamic agglomerations. This paper considers such relationships as the “assets” of economic activity and define the contents of relational assets as the function and nature of “convention.” (Convention functions as a device that coordinates the actions of economic actors.) This paper, based on Storper and Salais's framework of “worlds of production” according to the notion of convention, examines the source of dynamism of the Kojima production area in the garment industry. The result clearly shows that the notion of convention and the framework of “worlds of production” are very useful for the analysis of reality. In the Kojima production area, the relationships and “worlds of production” are complex at first sight. However, through this framework we can classify the “worlds of Production” of Kojima into three types: the “industrial world” and “market world”; the “market world” and “interpersonal world”; and finally the “industrial world.” Moreover, by considering the dimensions of interpretation and representation that constrain the actors' principles of action, this approach can demonstrate the dynamics of the Kojima production area. In Kojima, the three worlds of production are constructed around the “market world.” These worlds have appropriate conventions that coordinate the actors' behavior. Based on such conventions, local relationships become assets, which consequently support the success of the region. Using these frameworks, we can deal with the diversity of the real world and show why certain regions succeed economically.

Contact systems, modern agglomeration advantages and foreign investors

So far, research on behaviour of foreign investors, their location decisions and contact systems and changing meaning of agglomeration advantages have been on the margin of both theoretical and empirical research in the Czech geography. This article is an introduction to these research problems that gain rising importance due to increasing foreign direct investments in the Czech Republic and also due to political efforts to support successful settlement of current foreign investors. First, the article explains the notion of contact system and gives a review of the most important literature concerned with this field of study. Second, it deals with the role of information in the modern competitive environment and with the new meaning of agglomeration advantages. Crucial theses on the topic are presented and briefly discussed. Finally, a further research agenda is sketched out and key research questions are outlined.

Identifying the Geographical Agglomerations of Manufacturing Industries

The presence of localized industrial aggregation, also from the viewpoint of regional and country growth theories, can be regarded as a potential competitive advantage for regions or nations. While there is an abundance of qualitative analysis of the clustering of single industries and the way in which spatial concentration changes into economies of agglomeration, for a long time it was difficult to undertake quantitative work on the same subjects because of the lack of any econometrically operational definition of industrial agglomeration. Only recently, thanks to the work of Ellison and Glaeser (1997), it has become possible to measure the geographical concentration of production in a statistically correct way, excluding from the agglomeration phenomena cases of industrial concentration due to a random distribution of a small number of large plants. Following these intuition many other measures of agglomeration have been proposed. The empirical evidence provided by this literature confirms that most industries are, in a large number of countries, more highly clustered than a model of random spatial distribution of firms might predict. In these paper, starting from the work of Ellison and Glaeser we derive an algorithm to select and map industrial agglomeration. We propose, specifically, a test of the industrial specialization of an area based on the null hypothesis of absence of agglomeration advantages: in this way we can select the areas that pass the test and build around them a set of neighbouring areas that represent the space of probable diffusion of proximity advantages.Then, we apply the algorithm to the geographical distribution of manufacturing activities in Italy and give a description of the main features of agglomerated areas in the country. We are able, among other things, to verify the high variability that subsists among Italian agglomerations in connection with their dimension, characteristics of specialization and presence of large firms. The considerable dissimilarities found in the structural features of agglomerations confirm that, in econometric research into the advantages of producing in an industrial agglomeration, a strictly dichotomous approach can be strongly misleading.Finally, we discuss the conceptual differences between the “industrial agglomeration” obtained with our algorithm and the Marshallian notion of “industrial district” that represent a key analytical category in the literature on local development models in Italy.

Regional differences in structural characteristics of start-ups

In recent years new firm formation has become a major area of both research and policy. Yet, while regional differences in business start-up intensity, and their causes, have been the subject of various studies, few attempts have been made to investigate spatial variation in the structural features of start-ups. Theoretical considerations and the existing literature both suggest that agglomeration advantages and sectoral structure of regions figure prominently among the factors important in influencing start-up activity and characteristics. In the empirical analysis of start-ups in Austria we accordingly apply a regional typology based on these two factors. The data analysed were drawn from two similarly designed surveys relating to the years 1990 and 1997. It is shown that Austria displays marked regional differences in start-up activity, in terms of both intensity and characteristics. In line with the urban incubator hypothesis, tertiary centres - above all the Vienna region - displayed significantly above-average start-up rates, as well as more favourable structural characteristics of the new firms. Start-up activity in old industrial and in rural areas was substantially lower than average, structural features also being less positive there. Furthermore, the 1990 cohort displayed regional differences in business start-ups' survival period, although the Cox model indicated no significant direct influence of area type in this respect. In economic policy terms it can be concluded that, as well as a general improvement in the environment for start-ups, greater regional differentiation of financial, informational and consultancy support is desirable, since not only the conditions for new firm formation but also the intensity and characteristics of start-ups themselves vary considerably between regions.

Dynamic Clusters in Developing Countries: Collective Efficiency and Beyond

The alleged beneficial effects of regional industrial clusters for competitiveness and growth in developing countries have been subject to intensive study. A prominent place in the debate has been occupied by the collective efficiency approach. In this paper we extend that approach by incorporating insights from the literature on firm-level technological learning in development. The resulting framework is applied to the software cluster of Bangalore (India), to illustrate the ways in which spatial proximity of firms and other parties interacts with cluster knowledge creation in a dynamic environment. A number of new insights emerge, including the importance of "old economy" factors such as high demand for innovation, international technology transfer, low wages and strong technology and education institutions. To the extent that "new economy" regional factors also matter, spontaneous agglomeration advantages appear to be important alongside active collective efficiency.

Does Geographic Proximity Matter? Evidence from Clustered and Non-clustered Aeronautic Firms in Germany

L UBLINSKI A. E. (2003) Does geographic proximity matter? Evidence from clustered and non-clustered aeronautic firms in Germany, Reg. Studies 37 , 453-467. This paper analyses what types of inter-firm linkages are stronger between geographically proximate firms compared to distant firms. It compares survey results of clustered and dispersed firms in the German aeronautic (supplying) industry. Results show that geographic proximity is relevant and statistically significant for inter-firm linkages that may lead to the following effects: labour market pooling; knowledge spillovers; demanding local customers; and trust-based effects. All in all, results suggest that if agglomerative advantages are at work they are, at best, operating weakly. However, the results of this case study are not sufficient to confirm or disprove the theoretical arguments of agglomeration advantages. L UBLINSKI A. E. (2003) La proximité géographique, est-elle importante?: des preuves provenant des entreprises aéronautiques regroupées et dispersées en Allemagne, Reg. Studies 37 , 453-467. Cet article cherche à analyser quelles sortes de liens interentreprises sont plus fortes pour ce qui est des entreprises à proximité par rapport aux entreprises à distance. On compare les résultats provenant des enquêtes auprès des entreprises aéronautiques (fournisseurs) regroupées et dispersées en Allemagne. Les résultats laissent voir que la proximité géographique est pertinente et statistiquement importante pour ce qui est des liens interentreprises qui pourraient entraîner les effets suivants: la mise en commun des bassins d'emploi, les retombé es de connaissances, les clients locaux exigeants, et les effets fondés sur la notion de confiance. A tout prendre, les résultats de cette étude de cas ne suffisent pas pour confirmer ou réfuter les arguments thé oriques sur les avantages d'agglomération. L UBLINSKI A. E. (2003) Ist geographische Nähe von Bedeutung? Beweise von clusterartig und nicht clusterartig auftretenden Flugzeugbaufirmen in Deutschland, Reg. Studies 37 , 453-467. Dieser Aufsatz analysiert und vergleicht Typen der Firmenverknüpfungen zwischen geographisch benachbarten und weiter von einander entfernten Firmen bezüglich der Intensität ihrer Verbindungen. Er vergleicht Untersuchungsergebnisse zwischen clusterartig und verstreut angesiedelten Firmen der deutschen, die Luftfahrt beliefernden Industrien. Die Ergebnisse zeigen, daß geographische Nähe von Bedeutung, und statistisch signifikant für Firmenverknüpfungen ist, die zu folgenden Wirkungen führen können: Schaffung eines Bestandes von Arbeitskräften, Verbreitung von Kenntnissen, anspruchsvolle Kundschaft am Orte und auf Vertrauen begründete Wirkungen. Alles in allem, legen die Ergebnisse nahe, daß Ballungsvorteile, sofern sie überhaupt am Werke sind, sich bestenfalls nur schwach auswirken. Die Ergebnisse dieser Fallstudie reichen jedoch nicht aus, die theoretischen Argumente der Ballungsvorteile zu bestätigen oder zu widerlegen.