Spatial Agglomeration,Technological Innovations,and Firm Productivity: Evidence from Italian Industrial Districts

ABSTRACT The aim of this paper is to analyse the impact on firms' productivity of innovative activities and agglomeration effects among firms belonging to Marshallian industrial districts and the possible joint effect of these two forces. We study a sample of 2,821 firms active in the Italian manufacturing industry in the period 1992–1995. Our analysis uses an original data set based on three different Istituto Nazionale di Statistica statistical sources—Community Innovation Survey, Archivio Statistico delle Imprese Attive (Italian Business Register), and Sistema dei Conti delle Imprese (Italian Structural Business Statistics)—to estimate an “augmented” Cobb‐Douglas production function to account for the impact of technological innovations and district‐specific agglomeration effects on a firm's productivity growth. Our data set allows us to distinguish between product and process innovations, thus, through econometric analysis, we hope to achieve a better understanding of which of these two types of innovative activities benefits most from participation in an industrial district. Our empirical results show that belonging to an industrial district and making product innovations are key factors in the productivity growth of firms and that product innovations appear to have a greater effect on the economic performance of district rather than non‐district firms.     

The Influence of Agglomeration Externalities on Manufacturing Growth Within Indonesian Locations

Differences in agglomeration externalities and industrial regimes between locations generate performance differentials for their localized economic activities. For more than two decades, scholars have debated which externality is dominant for growth and under which regime. This study aims to resolve this debate by analyzing the influence of agglomeration economies on the growth of five‐digit manufacturing sectors and firms for Indonesian cities and regencies between 2000 and 2009. This is investigated employing the recent reconceptualization of variety based on sectoral linkages distinguishing related and unrelated varieties, which allow assessing their idiosyncratic economic roles. The findings support that economic relatedness is the dominant source for expansion of sectors and firms within Indonesian locations. Specialized clusters and competition are inversely related to manufacturing growth, although the latter fosters sectoral employment within Indonesian regencies. Population density and human capital show antithetic effects between cities and regencies due to their distinctive urbanization trajectories and industrial compositions.     

Do Geographic Concentration and Vertically Related Variety Foster Firm Productivity? Micro‐Evidence from Italy

Using a large unbalanced panel dataset of more than 12,000 Italian manufacturing firms for the period 1999–2007, this paper investigates the role of geographic concentration and related variety on firms' total factor productivity (TFP). The main idea is that diversification—captured by a measure of vertically related variety—promotes firm innovativeness and, consequently, productivity, but when the technology has been consolidated, firms join specialized clusters that enhance efficiency. Our results suggest that the effect on firms' TFP of geographic concentration is stronger than that of related variety. We also confirm previous findings on the relevance of agglomeration forces for small firms compared with medium and large firms, where these agglomerative forces do not seem to influence TFP.     

Best Practices in Twenty‐First‐Century Rural Development and Policy

The combination of less than perfectly mobile resources (human and other), pervasive urbanization trends with potentially significant (positive and negative) externalities, and an environment of fiscal restraint suggests the need for more effective rural development and policy. In contrast to historical sectoral or fad‐based policies, place‐based rural development programs and policies focus on rural populations in the context of a realistic assessment of the opportunities and constraints they face. Among the most promising opportunities are 1) improving integration (possibly through connective infrastructure) with urban economies in order to access agglomeration economies, 2) enhancing rural amenities, and 3) increasing entrepreneurial capacity.     

Industrial Structure and the Sources of Agglomeration Economies: Evidence from Manufacturing Plant Production

The impacts of agglomeration and local industrial structure are examined through an analysis of establishment‐level productivity. Using micro‐level data, measures of regional industrial specialization, economic diversity, and industrial competitive structure are incorporated together into a production function system estimated cross‐sectionally for three years and three manufacturing industries in the U.S. The findings demonstrate the importance of the influences of regional industrial competitive structure and diversity on performance.     

Research and development intensive clusters and regional competitiveness

Modern cluster theory provides reasons for positive external effects that accrue from the interaction of spatially proximate firms operating in common and related fields of economic activity. In this paper, we examine the impact of R&D-intensive clusters as a key factor of regional competitiveness on productivity growth. In relying on a hybrid approach of cluster identification, we examine effects of cluster specialization and diversity for a panel of German NUTS-3 regions in 2003–2019. After controlling for regional characteristics and unobserved heterogeneity, a robust cluster strength effect (i.e., specialization) on productivity growth is found within the context of conditional convergence across German regions. With regard to the underlying mechanisms, we find that the presence of multiple R&D-intensive clusters in specific technological fields is most strongly linked to higher levels of regional productivity growth. We also find that advantages from cluster specialization are strongest in key industrial sector such as automobile production, machinery, chemical and pharmaceutical products. Overall, our estimates particularly highlight the working of Marshallian externalities in productivity dynamics, while Jacobs-type spillovers tend to be partially realized. These findings indicate that some but not all cluster-based regional development strategies are promising policy tools to foster regional growth processes.     

Agglomeration and Competition among Chinese Cities: An Investigation of Taiwanese High‐Tech Foreign Direct Investment

The purpose of this study was to investigate how Taiwanese high‐tech firms' foreign direct investment (FDI) leads to agglomeration and competition among cities in China. By using social network analysis to analyze 1,111 subsidiaries affiliated with 270 multinational corporations (MNCs) during the years between 1988 and 2006 in 30 major Chinese cities, this study finds that: 1) agglomeration in Chinese cities falls into three primary categories: the hub cluster, the communication‐extended cluster, and the computer‐extended cluster. Among the aforementioned clusters, the hub cluster is the most critical in terms of firm location, and therefore is often a high‐priority investment site for Taiwanese high‐tech firms. 2) Chinese cities fall into four primary groups, or “blocks”: the core block, the coast block, the inland block, and the periphery block; these groups were determined by applying a structural equivalence analysis of which members of each type are in competition with one another. By linking the findings of the urban network characteristics to Chinese regional economic policies, this study provides guidance to aid executives in determining the optimal location for future FDI. Implications and suggestions for host country governments in terms of firms' investment strategies are also discussed.     

Reversal of economic fortunes: Institutions and the changing ascendancy of Barcelona and Madrid as economic hubs

This paper looks at the divergent economic trajectories of Barcelona and Madrid since Spain's transition to democracy. It highlights how Barcelona, the city that was better positioned four decades ago to emerge as the main Spanish economic hub, has lost out to Madrid. We argue that the contrasting trajectories of the two cities have less to do with the pull of Madrid as the capital of Spain, with the development of new infrastructure in the country, or with agglomeration economies, and more with institutional factors. A growing societal divide in Barcelona along economic, social, and identity lines has led to a greater breakdown of trust and to the development of strong groups with limited capacity to bridge with one another than in Madrid. This has entailed the emergence of negative externalities that have limited the economic potential for growth in Barcelona and facilitated the rise of Madrid as the main economic hub within Spain.     

Agglomeration of Services in American Metropolitan Areas

The growth of many service industries among American metropolitan areas stem from an eclectic set of forces. These include market penetration effects of increasing importance of services throughout the economy, agglomeration effects in immature and deregulated industries, and institutional and infrastructure constraints. These diverse forces are interpreted as urbanization and localization economies. A cycle of centralization of 27 fast growing service industries is documented for MS As in the period 1977-84. The two agglomeration effects are tested directly, using a power function model that relates employment and establishment growth to MSA size and initial level of employment in a local industry. Localization economies rather than the general advantages of metropolitan size best explain the growth patterns. This result implies that service industrial complexes are rapidly emerging in American metropolitan areas.     

Do Policymakers Locate Prisons for Economic Development?

While public goods can provide an overall increase in welfare, ‘inferior’ public facilities produce externalities specifically impacting host locations. Heterogeneous jurisdictional attributes, however, can cause net social benefits to vary across potential host communities. Using data from a unique public works project, this paper empirically investigates whether policymakers consider heterogeneous conditions when locating prison facilities. Results indicate that policymakers follow a process that maximizes net social benefits by systematically delegating such facilities to lagging communities; thereby potentially using the public facilities for economic development. Additionally, results suggest that policymakers properly consider existing infrastructure and agglomeration economies in the siting mechanism.     

Agglomeration Economies and Employment Growth: New Evidence from the Information Technology Sector in Italy

This paper uses local labour market area (LLMA) data to investigate the dynamics of employment in the information technology (IT) sector in Italy between 2001 and 2005. The aim is to test if agglomeration forces might significantly affect local IT employment growth. The OLS results are broadly consistent with those of earlier studies. In particular, IT employment growth is enhanced by industrial diversity (Jacobs externalities) and by plant size (economies of scale). At the same time, LLMAs with higher IT concentrations are associated with lower employment growth rates. As a robustness check, quantile regression analysis is performed. This additional set of results reveals that the role of agglomeration forces is different across IT growth levels.     

Internet development and the spatial optimization of regional productivity: Evidence from China

The rapid development of the Internet had a profound influence on the spatial distribution of economic output activities. On the basis of theoretical analysis, this study takes China's regions as research samples and construct a spatial econometric model to empirically analyze the impact of Internet development on regional productivity. The analysis reveals that the distribution of regional productivity in China had significant spatial correlation; regional productivity had positive spatial externalities; Internet development had significant promotion effects and positive spatial spillover effects to regional productivity, but the effects are heterogeneous in different subregions. The subregion analysis shows that the optimization effect of the Internet on regional productivity exhibits heterogeneity in different subregions. The threshold effect analysis reveals the increasing marginal effect of Internet development on regional productivity, and economic development and human capital supply are important factors restricting this marginal effect. Altogether, this study provides useful references on the positive effects of the Internet on regional productivity in the spatial dimension, and suggests that the policy makers can optimize the spatial distribution of regional productivity by promoting Internet access in various regions and narrowing the digital divide among regions.     

Local Diversity,Human Creativity,and Technological Innovation

The purpose of this paper is to point out some shortcomings of traditional approaches to the study of “knowledge spillovers” and to suggest an alternative based on how knowledge is actually created and exchanged by individuals. Which regional setting is the best incubator of technological change and economic growth? Is this promoted by regional diversity or specialization of economi activity? This study will include economic analyses of geographically localized “dynamic knowledge externalities, Jacob's externalities, or adding new work to old, industrial classification and technology combination, human creativity, and technology combination through human action and imaginative use of resources. Employees add to, or switch their product line; individuals move from one type of production to another; individuals observe a product/process in another setting and incorporate it; individuals possessing different skills and working for different firms collaborate; and urban diversity and resource collaboration are utilized. It is concluded that problems are solved through the combination of previously unrelated things and that promoting regional specialization at the expense of spontaneously evolved local diversity might be a counter‐productive policy.     

The space-time evolution and driving forces of county economic growth in China from 1998 to 2015

Coordinated growth in regional economies is fundamental for sustainable economic development. In this study, the space-time dynamics of GDP per capita for 2,303 counties in China from 1998 to 2015 were analyzed based on an exploratory space-time data analysis (ESTDA) framework. The results showed that: (a) there was significant and increasing positive spatiotemporal correlation among county-level economic growth; (b) local spatiotemporal correlation pattern demonstrated a high–high cluster at the eastern coast, and low–low dispersion in the vast central and western regions; (c) changes in LISA time trajectory revealed that economic growth in the coastal urban agglomeration and Inner Mongolia was more dynamic, indicating the emergence of a local spatial structure locking feature and trajectory dependence; and (d) industrialization and informatization were the two primary contributors to county economic growth. Our study suggests that Chinese government should construct network channels linking the central region with eastern China, cultivate economic growth poles and growth axis, and focus on technological innovation to unlock path dependence in county economic growth.     

Tax Incentives in an Economy with Public Goods

This study employs a dynamic computable general equilibrium (CGE) model of Ohio to evaluate the effect of a state corporate tax cut. The innovative features of this study are (1) the use of the cost of capital concept, (2) dynamic adjustment mechanisms in factor markets, and (3) incorporation of public goods in the household utility function and firms' production functions. The model results indicate that the stimulatory effects of tax cuts for economic development are muted when effects of public expenditures on the productivity of private capital and the migration of households are taken into account. This is because the reduction in public expenditure due to the tax cut implies (1) lower productivity for private industries and (2) lower levels of labor in-migration during the initial several periods after the policy shock as compared to the pre-policy sequence of equilibria. This study shows that evaluation of tax policy without simultaneously considering the effect of public goods can be misleading.     

Spatial Clusters in EU Productivity Growth

In the last year, a central issue in regional economic growth debate has been represented by the empirical analysis of Verdoorn's law related to the long‐term dynamic relationship between the rate of growth in output and the productivity growth due to increasing returns. Several papers have tested Verdoorn's law on European countries as well as many other world economies. Recently, attempts have been made to provide foundations for a spatial version of the original law specification. The main contributions were dedicated to the inclusion of spatial dependence in the economic model. Surprisingly, in the literature on Verdoom's law the analysis of the spatial heterogeneity is not often considered. The aim of this paper is the regional analysis of the spatial dependence and heterogeneity in Verdoorn's law, identifying spatial regimes that can be interpreted as clusters of productivity growth in European regions at NUTS 2 level. To pursue this objective, an optimization algorithm for the identification of groups is used. This constitutes a modified version of Simulated Annealing.     

Government support and firm innovation performance in Chinese science and technology parks: The perspective of firm and sub-park heterogeneity

Science and technology parks (STPs) are established to promote the firm innovation performance via agglomeration economy and government support in China. On-site qualified firms obtain government R&D funding as a type of government support, and they are offered differential innovation service caused by the differential capabilities of sub-parks which scatter throughout a single city. It is debatable whether those government supports at firm and sub-park levels can promote firm innovation capabilities. This study takes Zhangjiang National Innovation Demonstration Zone, Shanghai as an example. It applies a Tobit regression model to analyse the databases of Zhangjiang Annual Sampling Survey of Firms 2015 and Zhangjiang Development Report 2015. We find out at the firm level, government R&D funding has a significant and positive influence on firms' innovation, but government R&D funding generates a crowing-out effect the innovation performance of on-site firms with more R&D investment themselves. At the sub-park level, innovation service agencies of sub-parks do not exert an important role in influencing firms' innovation, and they even have negative moderating effects on the relationship between firm R&D investment and firm innovation performance. It reflects the mismatch between innovation service of STPs and firms' needs in China.     

Interaction effects between the agglomerative externalities affecting the survival of small startups

The purpose of this study is to identify the relationship between the survival of firms and the influence of agglomeration economies on firm location using a mixed effect Cox model considering random effects, given the industrial conditions of South Korea. Each agglomerative externality had a negative effect on the survival proportion of small startups except the related variety of the tertiary sector. However, the interaction effects between each externality and the location potential and among agglomerative externalities mostly played a complementary role to the survivability of startups; however certain effects reduced the survivability, and the effects were differentiated for each industrial sector. This study provides an advanced understanding of small firm performance after entry into the market in developing and developed nations.     

Physical Capital,Human Capital,and Social Capital: The Changing Roles in China's Economic Growth

This paper examines the roles of physical capital, human capital, and social capital in China's economic growth during the reform period 1981–2010. Empirical estimation confirms that physical capital and human capital contribute to the economic growth, probably due to the capital accumulation and the improvement of labor productivity. The impact of social capital turns from being insignificant in the 1980s and the 1990s to be positive in the 2000s, suggesting its rising importance in recent decades. A declining role of physical capital in the economic growth in China from 1990s to 2000s is also found. The findings hold for several additional robustness checks, including focusing on longer term determinants of the economic growth, subregional analysis, and endogeneity. Furthermore, the foreign direct investment inflows and adjustment of economic ownership structure are also important for economic growth in China.     

Voting with Their Feet: Jobs versus Amenities

ABSTRACT The determinants of rural and urban community population change over the period 1991–2001 are investigated at a very fine level of disaggregation for Canada. The study examines the influence of local amenities, economic factors, and agglomeration economies on population growth for age cohorts starting from the very young to the elderly. Motivated by the objective of assessing the overall jobs versus people question in economic development, the emphasis is on estimating the relative contribution of groupings of variables in explaining the variations in population change rather than the contribution of individual variables. Results indicate that rural and urban populations are influenced to differing degrees by amenity, economic, and urban scale groupings of variables and that there are variations among age cohorts in both urban and rural areas. While economic variables are the most influential in population change for all rural cohorts, their contribution somewhat diminishes with age. In urban areas, amenity, and economic variable groupings have approximately equal importance across all cohorts. For the key young adult cohort, the economic grouping is clearly the most influential in rural areas, while it is a close second to amenities in urban areas.