Network Effects and Geographic Concentration of Industry
AbstractThis paper provides a theory of “family network”, in contrast to “local externalities”, to explain the geographic concentration of industry. For many industries, one most important source of entrants is spinoffs, who typically locate near parent firms and benefit from knowledge linkage and business relation within the family network. As a result, firms are more likely to enter and less likely to exit if they are associated with a large family. Using a unique dataset of US automobile industry in its early years, we identify six historically important production centers and sixty spinoff families. Our empirical analysis disentangles the effect of “family networks” from other “local externalities,” and provides strong evidence that it was the former rather than the latter that caused the geographic concentration of US automobile production.
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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 08-14.
Length: 23 pages
Date of creation: Sep 2008
Date of revision: Sep 2008
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Web page: http://www.NETinst.org/
Spinoffs; Entry and Exit; Geography of Industry;
Find related papers by JEL classification:
- J6 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies
- L0 - Industrial Organization - - General
- R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-10-21 (All new papers)
- NEP-CSE-2008-10-21 (Economics of Strategic Management)
- NEP-ENT-2008-10-21 (Entrepreneurship)
- NEP-GEO-2008-10-21 (Economic Geography)
- NEP-IND-2008-10-21 (Industrial Organization)
- NEP-NET-2008-10-21 (Network Economics)
- NEP-URE-2008-10-21 (Urban & Real Estate Economics)
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