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Spatial Organization of Firms: Internal and External Agglomeration Economies and Location Choices Through the Value Chain

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  • Juan Alcacer
  • Mercedes Delgado
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    Abstract

    We explore the impact of geographically bounded intra-firm spillovers (internal agglomeration economies) and geographically bounded inter-firm spillovers (external agglomeration economies) on firms’ location strategies. Using data from the Census Bureau’s Longitudinal Business Database and the U.S. Cluster Mapping Project, we analyze organic expansions of biopharmaceutical firms (by both new establishments and employment increase in existing establishments) in the U.S. in 1993-2005. We consider all activities in the value chain and allow location choices to vary by R&D, manufacturing, and sales. Our findings suggest that (1) internal and external agglomeration economies have separate, positive impacts on location, with relevant differences by activity; (2) internal economies of agglomeration arise within an activity (e.g., among plants) and across activities (e.g., between manufacturing and sales); (3) the effects of internal economies across and within activities vary by activity and type of organic expansion; and (4) across-activity internal economies are asymmetric.

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    File URL: ftp://ftp2.census.gov/ces/wp/2012/CES-WP-12-33.pdf
    File Function: First version, 2012
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    Bibliographic Info

    Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 12-33.

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    Length: 31 pages
    Date of creation: Sep 2012
    Date of revision:
    Handle: RePEc:cen:wpaper:12-33

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    Related research

    Keywords: Location choices; agglomeration economies; value chain; organization theory;

    This paper has been announced in the following NEP Reports:

    References

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    1. J. Vernon Henderson & Yukako Ono, 2004. "Where do manufacturing firms locate their headquarters?," Working Paper Series WP-04-29, Federal Reserve Bank of Chicago.
    2. Gilles Duranton & Diego Puga, 2001. "Nursery Cities: Urban Diversity, Process Innovation, and the Life Cycle of Products," American Economic Review, American Economic Association, vol. 91(5), pages 1454-1477, December.
    3. Agrawal, Ajay & Cockburn, Iain, 2003. "The anchor tenant hypothesis: exploring the role of large, local, R&D-intensive firms in regional innovation systems," International Journal of Industrial Organization, Elsevier, vol. 21(9), pages 1227-1253, November.
    4. Zucker, Lynne G & Darby, Michael R & Brewer, Marilynn B, 1998. "Intellectual Human Capital and the Birth of U.S. Biotechnology Enterprises," American Economic Review, American Economic Association, vol. 88(1), pages 290-306, March.
    5. Audretsch, David B & Feldman, Maryann P, 1998. "Innovation in Cities: Science-Based Diversity, Specialization and Localized Competition," CEPR Discussion Papers 1980, C.E.P.R. Discussion Papers.
    6. Michael Porter, 2003. "The Economic Performance of Regions," Regional Studies, Taylor & Francis Journals, vol. 37(6-7), pages 549-578.
    7. Ketokivi, Mikko, 2006. "When Does Co-location of Manufacturing and R&D Matter?," Discussion Papers 1051, The Research Institute of the Finnish Economy.
    8. Juan Alcácer, 2006. "Location Choices Across the Value Chain: How Activity and Capability Influence Collocation," Management Science, INFORMS, vol. 52(10), pages 1457-1471, October.
    9. Ellison, G. & Glaeser, E.L., 1994. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," Working papers 94-27, Massachusetts Institute of Technology (MIT), Department of Economics.
    10. Mercedes Delgado & Michael Porter & Scott Stern, 2010. "Clusters, Convergence, and Economic Performance," Working Papers 10-34, Center for Economic Studies, U.S. Census Bureau.
    11. Sjoerd Beugelsdijk & Philip McCann & Ram Mudambi, 2010. "Introduction: Place, space and organization-- economic geography and the multinational enterprise," Journal of Economic Geography, Oxford University Press, vol. 10(4), pages 485-493, July.
    12. J. Vernon Henderson & Ari Kuncoro & Matthew Turner, 1992. "Industrial Development in Cities," NBER Working Papers 4178, National Bureau of Economic Research, Inc.
    13. Myriam Mariani, 2002. "Next to Production or to Technological Clusters? The Economics and Management of R&D Location," Journal of Management and Governance, Springer, vol. 6(2), pages 131-152, May.
    14. Ricardo, David, 1821. "On the Principles of Political Economy and Taxation," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, edition 3, number ricardo1821.
    15. Edward Glaeser & William Kerr, 2008. "Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?," Working Papers 08-37, Center for Economic Studies, U.S. Census Bureau.
    16. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
    17. Mercedes Delgado & Michael E. Porter & Scott Stern, 2010. "Clusters and entrepreneurship," Journal of Economic Geography, Oxford University Press, vol. 10(4), pages 495-518, July.
    18. Teresa C. Fort, 2013. "Breaking Up Is Hard To Do: Why Firms Fragment Production Across Locations," Working Papers 13-35, Center for Economic Studies, U.S. Census Bureau.
    19. Mercedes Delgado & Michael Porter & Scott Stern, 2010. "Clusters and Entrepreneurship," Working Papers 10-31, Center for Economic Studies, U.S. Census Bureau.
    20. Wilbur Chung & Juan Alcácer, 2002. "Knowledge Seeking and Location Choice of Foreign Direct Investment in the United States," Management Science, INFORMS, vol. 48(12), pages 1534-1554, December.
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