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Clusters, Convergence, and Economic Performance

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  • Mercedes Delgado
  • Michael Porter
  • Scott Stern
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    Abstract

    This paper evaluates the role of regional cluster composition in the economic performance of industries, clusters and regions. On the one hand, diminishing returns to specialization in a location can result in a convergence effect: the growth rate of an industry within a region may be declining in the level of activity of that industry. At the same time, positive spillovers across complementary economic activities provide an impetus for agglomeration: the growth rate of an industry within a region may be increasing in the size and strength (i.e., relative presence) of related economic sectors. Building on Porter (1998, 2003), we develop a systematic empirical framework to identify the role of regional clusters – groups of closely related and complementary industries operating within a particular region in regional economic performance. We exploit newly available data from the US Cluster Mapping Project to disentangle the impact of convergence at the region-industry level from agglomeration within clusters. We find that, after controlling for the impact of convergence at the narrowest unit of analysis, there is significant evidence for cluster-driven agglomeration. Industries participating in a strong cluster register higher employment growth as well as higher growth of wages, number of establishments, and patenting. Industry and cluster level growth also increases with the strength of related clusters in the region and with the strength of similar clusters in adjacent regions. Importantly, we find evidence that new industries emerge where there is a strong cluster environment. Our analysis also suggests that the presence of strong clusters in a region enhances growth opportunities in other industries and clusters. Overall, these findings highlight the important role of cluster-based agglomeration in regional economic performance.

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    File URL: ftp://ftp2.census.gov/ces/wp/2010/CES-WP-10-34.pdf
    File Function: First version, 2010
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    Bibliographic Info

    Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 10-34.

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    Length: 46 pages
    Date of creation: Oct 2010
    Date of revision:
    Handle: RePEc:cen:wpaper:10-34

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    References

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    1. Ron S Jarmin & Javier Miranda, 2002. "The Longitudinal Business Database," Working Papers 02-17, Center for Economic Studies, U.S. Census Bureau.
    2. Andrés Rodríguez-Clare, 2005. "Clusters and Comparative Advantage: Implications for Industrial Policy," IDB Publications 6830, Inter-American Development Bank.
    3. Matthew J. Higgins & Daniel Levy & Andrew T. Young, 2006. "Growth and Convergence across the United States: Evidence from County-Level Data," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 671-681, November.
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    Cited by:
    1. Edward L. Glaeser & Sari Pekkala Kerr & William R. Kerr, 2013. "Entrepreneurship And Urban Growth:An Empirical Assessment With Historical Mines," Working Papers 13-15, Center for Economic Studies, U.S. Census Bureau.
    2. Juan Alcacer & Mercedes Delgado, 2012. "Spatial Organization of Firms: Internal and External Agglomeration Economies and Location Choices Through the Value Chain," Working Papers 12-33, Center for Economic Studies, U.S. Census Bureau.
    3. Robert J. Stimson, 2012. "Troubling Times-The Gfc And Its Implications For Regional Performance. Part One: The United States And Europe," Romanian Journal of Regional Science, Romanian Regional Science Association, vol. 6(2), pages 1-30, DECEMBER.
    4. Saon Ray & Nisha Taneja & Neetika Kaushal, 2011. "Opening India’s Garments Sector to South Asia," Working Papers id:4461, eSocialSciences.

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