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.     

The heterogeneity of agglomeration effect: Evidence from Chinese cities

Using annual surveys of industrial firms in China from 1998 to 2007, this paper applies the non‐linear least squares (NLS) method based on a grid search to analyse the effect of city size on firm total factor productivity (TFP). The results show that overall, the agglomeration effects in large cities, but not selection effects, significantly promote improvement in firm TFP. The optimal agglomeration scales of different industries differ as follows: those of capital‐ and technology‐intensive industries are larger than those of labour‐intensive industries. The agglomeration effects are also robust to different spatial areas without considering administrative boundaries. An inverted U‐shaped relationship exists between firm size and agglomeration effects, while the relationship between firm age and agglomeration effects is U‐shaped. State‐owned firms experience weaker agglomeration effects than non‐state‐owned firms. Cities higher in the administrative hierarchy and those with special economic zones have stronger agglomeration effects. However, cities higher in the administrative hierarchy and those with a larger economic development zone index can provide more resources to increase the survival rate of low‐productivity firms; thus, selection effects are not significant in Chinese cities.     

Outsourcing and Firm Productivity in a Specific Local Production System: Evidence from Reggio Emilia (Italy)

This paper investigates the impact of outsourcing on the labor productivity of firms in a specific local production system. A number of hypotheses about the location‐specific effects of outsourcing are put forward and tested on a sample of firms in the province of Reggio Emilia (within the Emilia‐Romagna region, in North‐East Italy). The relationship between outsourcing and productivity turns out positive only if considering the externalization of high value‐added activities. On the contrary, it is negative in the case of low value‐added activities. This occurs to a greater extent for firms in mature industrial districts, whose socio‐economic conditions however do not arrive to magnify the productivity premium of externalizing high value‐added ones. The technological innovativeness of the firms instead helps with that, pointing to a developmental use of outsourcing in the area.     

The impact of foreign influence on exporting through open innovation

Foreign direct investment brings both increased competitive pressures and opportunities for domestic Small and Medium Sized Enterprises (SMEs). Competition may force them to seek new international markets, but also provide access to international customers. However, as economies become more knowledge-based in order to access international markets, SMEs must seek to innovate. This study examines how foreign firm presence and innovation influence the exporting activities of SMEs. It contributes to the existing literature by dividing innovation into product/process innovation and in-house/open innovation. With open innovation, products are more likely to be novel and productivity boosted to a larger degree. We interact different types of innovation with foreign influence to examine whether there is a moderating influence on the relationship. The individual firm level data and foreign influence data are from the Longitudinal Small Business Survey and Office for National Statistics. Whether firms are active exporters is explored using multilevel logit regressions. Both innovative activities and the foreign influence increase the likelihood of exporting. In-house product innovation boosts export propensity to a lesser degree in areas with higher levels of foreign influence. The hypothesis that open innovation has more impact on exporting activities when foreign influence is greater is not supported for either type of innovation.     

Building innovative capacity in regional entrepreneurship and innovation (eco)systems: Startups versus incumbent firms

This article studies how three sets of regional factors—knowledge, agglomeration, and openness—impact and interact differently with startups and incumbent firms in their innovative capacity building. Based on a large dataset of Chinese high-tech firms, regression analysis shows that the speed of growing startup innovative capacity relies positively on regional knowledge stock and localization economies. In addition to regional knowledge stock, incumbent innovative capacity building benefits from urbanization economies and regional openness. Favorable regional factors, including the presence of universities and the clustering of knowledge-intensive peers, also enable startups (but not incumbents) to leverage internal knowledge assets into their innovative capacity. The results suggest that it is not only the access to the external knowledge environment but also proactive endeavors to cross-fertilize between internal and external knowledge that underlie the eco-systemic nature of startup innovative capacity building.     

Threshold Firms: Innovation,Design and Collaboration in British Columbia's Forest Economy

This paper assesses the extent to which threshold firms have emerged within British Columbia's wood processing industries. Threshold firms comprise an innovative business segment and are growth oriented, larger than most small firms but not giant, locally owned, international in scope at least with respect to exporting, reliant on skilled, well paid employees, and that have developed knowledge‐based product market advantages. The analysis draws on an extended case study survey of 14 firms located in the lower mainland and Okanagan regions of British Columbia, and selected for their potential as threshold firms. The analysis examines six characteristics associated with threshold firms: size and ownership, internationalization, wood supply, labor relations, innovative design and collaboration, and local embeddedness. These firms reveal attributes of threshold firms, and the paper concludes by suggesting that an innovative forest policy for British Columbia could usefully focus on this type of firm.     

The Territorial Agglomerations of Firms: A Social Capital Perspective from the Spanish Tile Industry

ABSTRACT Using the Social Capital theoretical framework, territorial agglomerations of firms, such as in the industrial district, can be identified as dense strong‐tie networks and are thus suitable for exploiting activities. This paper addresses the possible exploring limitations of these clustered firms. Following alternative explanations, such as the structural holes and weak tie approaches, it is proposed that local institutions may play a role as intermediary agents between external disperse networks and internal dense networks, therefore enabling these firms to deal with the requirements of an ever‐changing environment. The paper also develops an empirical section where the Spanish ceramic tile industrial district is described in order to illustrate theoretical arguments. Findings suggested a number of ways in which local institutions may facilitate the creation of value for firms. Particularly, local institutions interact with many external firms and institutions and undertake research projects with local firms. In addition, some quantification of the participation of firms in the activities carried out by institutions is offered, suggesting explanations for the barriers that prevent firms from gaining direct access to external networks.     

The Innovativeness and Heterogeneity of Foreign‐Invested High‐Tech Companies in Shanghai

China has taken a foreign direct investment‐based approach toward increasing its capital and knowledge base, and developing into an innovative economy. However, little quantitative evidence exists about the factors that drive innovations of foreign‐invested enterprises (FIEs) there. This paper uses survey data from high‐technology firms in Shanghai to discuss factors affecting their innovativeness. It takes the concepts of absorptive capacity, export orientation, and innovation‐related cooperation as a starting point. It highlights how the interplay of strategies and resources affects innovativeness and heterogeneity of FIEs. The most innovative FIEs are endowed with a strong human capital base and R&D activities, which at the same time target export markets and whose cooperative partners involve firms other than their parent company. The results underline the necessity to differentiate between the different types of FIEs when examining their innovativeness.     

The impact of external knowledge sourcing on innovation outcomes in rural and urban businesses in the U.S.

This paper examines the relationship between external knowledge sourcing and a diverse set of innovation outcomes in rural and urban establishments in the U.S. Existing studies in the broader knowledge management literature principally examine firms in a single industry, overwhelmingly rely on patent data to proxy for innovation, and cannot account for the innovations of businesses in rural American markets. By addressing these limitations using data from the 2014 Rural Establishment Innovation Survey of the USDA's Economic Research Service, this research provides novel insights into how externally acquired knowledge by American establishments may support innovation. Results of the analysis suggest that external knowledge sourcing may specifically promote product, process, and green innovation in U.S. firms. While collective results when external sources of information are divided by industry orientation fail to show that sources outside of a firm's industry play a dominant role in the innovation processes of American establishments in general, findings provide evidence for an outsized impact of these relationships within rural establishments specifically and suggest that external knowledge sourcing from extra‐industry organizations is most critical for promoting successful innovation in rural firms. Results additionally indicate that knowledge sourcing from non‐local organizations may be more important for supporting innovation in rural compared to urban markets.     

Sense of belonging to an industrial district and knowledge acquisition: The role of strong and trusting interorganizational relations

Studying the level of sense of belonging in industrial districts is a key factor in understanding how firms acquire knowledge. This paper focuses on how the strength of ties and trust developed in interorganizational relationships drives the sense of belonging to the industrial district and leads firms to acquire knowledge. The proposed model was applied to a sample of 166 companies located in the industrial districts of the Spanish footwear industry. The findings suggest that the level of sense of belonging alone does not allow firms in industrial districts to directly acquire external knowledge. Only companies that are able to utilize their greater level of sense of belonging to industrial districts to generate strong and trusting relationships with other agents will acquire relevant knowledge. The study provides important empirical and theoretical contributions and several implications for managers.     

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.     

A Spatial Analysis of the R&D‐Productivity Nexus at Firm Level

The aim of this paper is to evaluate the effect of research and development (R&D) on productivity by taking into account productivity spillovers. To this end, by using a sample of Italian manufacturing firms over the period 2004–2006 provided by the Xth UniCredit‐Capitalia survey (2008), we have analyzed the role of R&D in firm productivity by using a spatial autoregressive model. In so doing, we have allowed the productivity of each firm to be affected by the productivity of nearby firms. Results show that R&D significantly affects Italian firm productivity and that productivity spillovers across firms matter. Moreover, productivity is found to be positively affected by intrasectoral R&D spillovers, while intersectoral R&D spillovers do not have a significant effect.     

Who leads regional industrial dynamics? “New industry creators” in Chinese regions

Recent evolutionary economic geography studies have argued that regional diversification emerges as a path‐dependent process, as regions often branch into industries that are related to its industrial structure. However, it is less clear who are creating new industries and under what regional conditions. This research seeks to fill this gap and identify “new industry creators” in regional industrial diversification. We differentiate two types of new industry formation—path‐breaking and path‐dependent—and examine whether some new industry creators are more path‐breaking than others, by incorporating two factors that have been largely overlooked in recent literature on technological relatedness—firm heterogeneity and regional institutions. Based on a firm‐level data set of China’s manufacturing industries, this paper shows that path‐breaking and path‐dependence coexist. Empirical results confirm that firm heterogeneity and regional institutions not only affect the firms’ capabilities in creating new industries, but also encourage/discourage firms to be adventurous and path‐breaking. This research implies that lagging regions can catch up with developed regions by coordinating regional resources and adjusting local institutional arrangements to attract more path‐breaking firms.     

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.     

Agglomeration and firm performance in times of economic turmoil: Evidence from Tunisian firm-level data

The paper analyzes the relationship between agglomeration economies (urbanization, specialization, and diversity) and firm-level performance during a period of deep economic downturn (2011–2018). We use data from the National Survey of Economic Activities for eight Tunisian manufacturing industries to explore which agglomeration externalities matter most for firm performance after the revolution. The analysis considers, in addition, the role played by selected firm-specific characteristics. The empirical results, based on a multilevel analysis approach, sanction the importance of firm-specific determinants of productivity and exporting. They also indicate that only specialization externalities have a positive and significant effect on firms' performance. The replicate results during a period of economic stability (1998–2004) show, however, that specialization and urbanization economies are both relevant predictors of firms' productivity and that more productive firms, in particular the smaller ones, are better able to benefit from agglomeration. This finding has not been confirmed for the post-revolutionary period.     

Local Embeddedness,Market Focus,and Productivity: Evidence of Taiwanese Manufacturing MNE Subsidiaries in China

There has been considerable literature discussing the characteristics and importance of location‐specific factors in the context of Foreign Direct Investment (FDI), but very little literature linking location‐specific factors to productivity. This study explores, for each location‐specific factor, the relationship between the degree of local embeddedness and the labor productivity. We contribute to the body of literature on location‐specific factors by arguing that market focuses play a pivotal role in determining the impact of local embeddedness on productivity. Based on their strategic choices, we categorize Taiwanese manufacturing multinational enterprise (MNE) subsidiaries in China into two groups: the local‐market‐focus group and the export‐market‐focus group. The paper fits the Ordinary Least Squares (OLS) regression models to the export‐market‐focus group and the local‐market‐focus group separately. For these two groups, each local‐embeddedness variable exerts different effect on labor productivity. Results also suggest that local‐market‐focus FDI is more affected by the host country's local business environment than is export‐market‐focus FDI. Although this study cannot represent all foreign companies in China, its dynamism offers a rich context in which to explore a deeper understanding of foreign companies' business activities in China.     

Nothing is in the Air

It has often been argued that “there is something in the air” which makes firms in high‐density environments—such as cities or clusters—more innovative. The co‐location of firms facilitates the emergence of serendipity and casual encounters which promote innovation in firms. We assess this hypothesis using data from a survey of Norwegian firms engaged in innovation partnerships. The results indicate that there may be “much less in the air” than is generally assumed in the literature. The relationships conducive to innovation by Norwegian firms emerged as a consequence of purpose‐built searches and had little to do with chance, serendipity, or “being there.”     

Agglomeration,resource reallocation and domestic value-added ratio in exports

Using micro merged data of China's customs transaction and National Bureau of Statistics Annual Surveys of Industrial Firms data, this paper analyzes the effect of industrial agglomeration on domestic value-added in exports to gross exports (DVAR). It is found that industrial agglomeration significantly improves DVAR. Mechanism tests show that industrial agglomeration promotes DVAR by increasing the relative price of imported intermediate inputs and domestic inputs (relative price effect), as well as restrains DVAR by restraining cost markup of firm (cost markup effect). However, the promotion effect of the “relative price effect” is greater than the restraint effect of the “cost markup effect”. In addition, accession to the World Trade Organization and exchange reform strengthen the promotion effect of industrial agglomeration. The result of dynamic decomposition shows that 74.62% of the industry's DVAR increase is attributed to the resource re-allocation effect, which is an important channel for industrial agglomeration to promote DVAR.     

Productive Efficiency and Territorial Externalities in Small and Medium‐Sized Industrial Firms: A Dynamic Analysis of the District Effect

A series of works have analysed differential behaviour in terms of productive efficiency between companies inside a hypothetical industrial district and those outside the district. This objective has been addressed using measures of technical efficiency. The results obtained provide valuable information for quantifying the district effect at a given moment in time. However, constant changes in the market and business behaviour mean that it is worthwhile studying the business district effect from a dynamic point of view. In this study, we provide this new vision through the use of Malmquist productivity indices. This methodology enables us to analyse possible differential evolutions by comparing the productive efficiency of companies inside and outside a district over a period of time. An empirical application has been made on a set of small and medium‐sized Spanish ceramic producers during the period of economic expansion between 1996 and 2007.     

State Characteristics and the Locational Choice of Foreign Direct Investment: Evidence from Regional FDI in Mexico 1989–2006

ABSTRACT Despite the growing importance of foreign direct investment (FDI) in the Mexican economy, statistical evidence on the determinants of the regional distribution of foreign‐owned firms is seriously limited. In this paper, empirical findings are presented from a variety of econometric models that identify several regional characteristics influencing the locational choice of FDI. The main findings are threefold. First, several locational factors appear to be potentially important; these include regional demand, wages, schooling, infrastructure, and agglomeration economies. Second, the effect of agglomeration economies stems from several sources. In particular, the regional presence of agglomerations of manufacturing activity and of foreign‐owned manufacturing firms both have an independent positive effect on the locational decision of new FDI. Third, the locational process of maquiladora firms differs from the locational process of overall FDI. The actual findings suggest that regional demand and infrastructure, as suggested above, are not important locational factors for export‐oriented firms. Furthermore, whereas agglomeration economies from manufacturing and the presence of existing FDI attract new maquiladora investment, the presence of a regional agglomeration of services deters the location of new maquiladora firms. Finally, agglomeration economies appear to be more important in the locational process of maquiladora firms.