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Agglomeration, related variety and vertical integration

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  • Giulio Cainelli
  • Donato Iacobucci

Abstract

Several recent studies investigate the relation between geographic concentration of production and vertical integration, based on the hypothesis that spatial agglomeration of firms in the same industry facilitates input procurement thereby reducing the degree of vertical integration. The present paper contributes to this debate by also considering the effects of industry variety at the local level. Specifically, we consider two forms of variety: unrelated variety and vertically related variety. The latter index is constructed using information drawn from input-output tables and captures the opportunities for outsourcing within the local system. We consider inter-industry vertical integration by taking account of the ownership of activities with input-output linkages. Using a dataset of 24,663 Italian business groups in 2001, we estimate Tobit models to investigate the influence of vertically related variety and other agglomeration forces on the degree of vertical integration of groups. Our evidence confirms that vertical integration is influenced by industry specialization at the local level. We also find that the higher the vertically related variety, the lower the need for firms to integrate activities since they have more opportunities to acquire intermediate goods and services within the local system.

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Bibliographic Info

Paper provided by Public policies and local development in its series Openloc Working Papers with number 1104.

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Date of creation: 2011
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Handle: RePEc:trn:utwpol:1104

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Keywords: vertical integration; agglomeration; related-variety; business group;

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Citations

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Cited by:
  1. Roberto Antonietti & Giulio Cainelli & Claudio Lupi, 2012. "Vertical disintegration and spatial co-localization: the case of Kibs in the Metropolitan Region of Milan," Openloc Working Papers 1202, Public policies and local development.
  2. Giulio Cainelli & Eleonora Di Maria & Roberto Ganau, 2011. "Agglomeration, related-variety and internationalisation. Does a relationship exist?," Openloc Working Papers 1114, Public policies and local development.
  3. Frank Van Oort, 2013. "Agglomeration Economics Beyond the Specialisation-Diversity Controversy," Papers in Evolutionary Economic Geography (PEEG) 1313, Utrecht University, Section of Economic Geography, revised Aug 2013.
  4. Roberto Antonietti & Maria Rosaria Ferrante & Riccardo Leoncini, 2014. "Trust your neighbour. Industrial relatedness, social capital and outsourcing," Papers in Evolutionary Economic Geography (PEEG) 1403, Utrecht University, Section of Economic Geography, revised Jan 2014.
  5. Cirer-Costa, Joan Carles, 2013. "The role of geography in the success of the balearic tourism industry," MPRA Paper 47701, University Library of Munich, Germany.
  6. Giulio Cainelli & Andrea Fracasso & Giuseppe Vittucci Marzetti, 2012. "Spatial agglomeration and productivity in Italy: a panel smooth transition regression approach," Openloc Working Papers 1204, Public policies and local development.
  7. Roberto Antonietti, 2014. "From Outsourcing to Productivity, Passing Through Training: Microeconometric Evidence from Italy," Working Papers 2014.12, Fondazione Eni Enrico Mattei.

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