In the context of increased global trade and accompanying competition, firms are increasingly engaged in industrial clusters. This column uses firm-level transaction data to analyse the impact of firms’ relationships with financial institutions on their networking within clusters. Firms participating in government-supported cluster programmes increase their transaction networks significantly faster than those not in clusters. The column also finds that firms with expanding networks are mainly financed by regional banks, not national or global ones.
Toshihiro Okubo, Tetsuji Okazaki, Eiichi Tomiura, 19 July 2016
Yasuyuki Todo, Petr Matous, 26 June 2015
Firm networks affect innovation and growth through diffusion of knowledge and information. This column argues that promoting ties with firms outside of the region should be an important part of cluster policies. Such ties can bring new information to the region and can enhance innovation. Distant firm partners can also help in the short-run recovery after a disaster, as was the case following the 2011 earthquake in Japan.
Marius Brülhart, Helen Simpson, 12 June 2015
The evidence on how industry-level agglomeration affects government taxation is mixed. This column argues that local governments offer subsidies to favour pre-existing employment in locally agglomerated industries. This finding is in line with theories of policy capture rather than government taxation of agglomeration benefits.
Kristian Behrens, Théophile Bougna, Mark Brown, 05 March 2015
Transport costs fell precipitously during the last century leading many observers to posit that the world has ‘become flat’. If this were true, the costs of transporting goods should no longer have much bearing on firms’ location choices and the spatial structure of economic activity. This column, using manufacturing data for Canada from 1990 to 2008, argues that despite a decline in geographical concentration of industries, location patterns still change with fluctuations in transport costs.
Hongyong Zhang, 21 July 2014
The Chinese government has been actively promoting innovation via policies such as R&D subsidies, tax relief, and location policies. Since 1995, central and local governments have established more than 100 clusters in over 60 cities. This column presents new evidence on the effect of the concentration of firms on product innovation (new products) in the manufacturing industries.
William Kerr, Oliver Falck, Christina Günther, Stephan Heblich, 11 February 2013
Governments around the world are fostering industrial ‘clusters’, hoping to create agglomeration economies. Using the political division of Germany in 1949, this column argues that heightened firm density can raise costs for incumbent firms in addition to the often-cited agglomeration benefits. This is important for policymakers contemplating efforts to promote their local areas by targeted cluster initiatives and bidding to attract large firms. Policy efforts that are neutral in orientation – such as physical infrastructure investments or improving the generation and dissemination of knowledge – may be more effective alternatives.
Marius Brülhart, 07 January 2009
Paul Krugman suggests that his Nobel-prize-winning “core-periphery” model was perhaps more relevant a century ago than today. This appears to be true in terms of overall manufacturing concentrations in Europe and North America, which are unravelling. Large-scale agglomeration forces, however, are alive and well in the developing world, as are localised sectoral clustering phenomena in industrialised countries.
Philippe Martin, Thierry Mayer, Florian Mayneris, 04 July 2008
Governments spend heavily on industrial clusters. They are wasting their money if firms naturally cluster to reap agglomeration gains. This column presents evidence from France that questions policymakers’ enthusiasm for promoting clusters.
Philippe Martin, Thierry Mayer, Florian Mayneris, 16 June 2008
The analysis of agglomeration economies focuses around two separate important questions: how large the gains from agglomeration are and how much firms internalize these gains when deciding where to locate. In order to provide answers, the authors of CEPR DP6858 focus on agglomeration externalities and distinguish between urbanization economies, which refer to the cross fertilization of different industries on a given territory and localization economies, which group the concepts of externalities on inputs market, on the labour market and knowledge.