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Transaction Costs, Agglomeration Economies, and Industrial Location

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  • GAVIN A. WOOD
  • JOHN B. PARR

Abstract

ABSTRACT Following an outline of the different types of agglomeration economy, consideration is given to transaction costs. Transaction costs may have a definite spatial dimension because institutional, commercial, cultural, and language characteristics are differentiated across the geographic space separating market agents. The concept of transaction space is introduced to represent the spatial differentiation of these characteristics, and this concept is used to cast light on how space can contribute to coordination and agency problems that raise transaction costs. Contractual agreements that are rearranged, so as to span a less heterogeneous transaction space, permit the reduction of transaction costs. Agglomeration can then be interpreted as an alternative to hierarchical structures within firms in economizing on transaction costs. The paper concludes with illustrations of how this framework may help to understand the spatial implications of corporate restructuring and new information technologies.

Suggested Citation

  • Gavin A. Wood & John B. Parr, 2005. "Transaction Costs, Agglomeration Economies, and Industrial Location," Growth and Change, Wiley Blackwell, vol. 36(1), pages 1-15, February.
    • Handle: RePEc:bla:growch:v:36:y:2005:i:1:p:1-15
    DOI: 10.1111/j.1468-2257.2005.00264.x
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    5. Edward L. Glaeser & David I. Laibson & José A. Scheinkman & Christine L. Soutter, 2000. "Measuring Trust," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(3), pages 811-846.
      • Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
    6. Carla Mascarenhas & Carla Marques & João J. Ferreira, 2020. "One for All and All for One: Collaboration and Cooperation in Triple Helix Knowledge Cocreation," International Regional Science Review, , vol. 43(4), pages 316-343, July.
    7. Mark Drabenstott, 2005. "A review of the federal role in regional economic development," Monograph, Federal Reserve Bank of Kansas City, number 2005arotfrire, March.
    8. Liu, Zheming & Zeng, Saixing & Jin, Zhizhou & Shi, Jonathan Jingsheng, 2022. "Transport infrastructure and industrial agglomeration: Evidence from manufacturing industries in China," Transport Policy, Elsevier, vol. 121(C), pages 100-112.
    9. Quiggin, John, 2006. "Cities, connections and cronyism," Risk and Sustainable Management Group Working Papers 151513, University of Queensland, School of Economics.
    10. David Jacobson & Francesco Garibaldo, 2011. "The Role of Company Networks in Low-tech Industries," Chapters, in: Paul L. Robertson & David Jacobson (ed.), Knowledge Transfer and Technology Diffusion, chapter 4, Edward Elgar Publishing.
    11. Manuel A. Espitia Escuer & Lucia I. Garcia Cebrian & Antonio Munoz Porcar, 2011. "Las Caracteristicas De Las Empresas Como Factores Determinantes En Su Localizacion," Revista Internacional Administracion & Finanzas, The Institute for Business and Finance Research, vol. 4(3), pages 99-111.
    12. Giulio Cainelli & Donato Iacobucci, 2012. "Agglomeration, Related Variety, and Vertical Integration," Economic Geography, Clark University, vol. 88(3), pages 255-277, July.
    13. John Quiggin, 2005. "Localisation, globalisation and finance," Australian Public Policy Program Working Papers WP5P05, Risk and Sustainable Management Group, University of Queensland.
    14. Taedong Lee & Susan Meene, 2012. "Who teaches and who learns? Policy learning through the C40 cities climate network," Policy Sciences, Springer;Society of Policy Sciences, vol. 45(3), pages 199-220, September.
    15. Susanne Meyer & Daniel Schiller & Javier Revilla Diez, 2009. "The Janus‐Faced Economy: Hong Kong Firms As Intermediaries Between Global Customers And Local Producers In The Electronics Industry," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 100(2), pages 224-235, April.
    16. Fabrizio Errico & Angelo Corallo & Alessandra Spennato & Gianna Elisa Berlingerio, 2024. "Spatial Proximity Versus Social Distance: Partnership Development in the Cross-Border Cooperation," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 461-486, March.
    17. Jason Henderson & Stephan Weiler, 2010. "Entrepreneurs and Job Growth: Probing the Boundaries of Time and Space," Economic Development Quarterly, , vol. 24(1), pages 23-32, February.
    18. Isabel Diez-Vial & Emilio Alvarez-Suescun, 2010. "Geographical Agglomeration as an Alternative to Vertical Integration," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 36(4), pages 373-389, June.
    19. Kristin Kronenberg & Kati Volgmann, 2014. "Knowledge-intensive employment change in the Dutch Randstad and the German Rhine-Ruhr area: comparable patterns of growth and decline in two metropolitan regions?," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 34(1), pages 39-60, February.
    20. Andrew Johnston & Robert Huggins, 2017. "University-industry links and the determinants of their spatial scope: A study of the knowledge intensive business services sector," Papers in Regional Science, Wiley Blackwell, vol. 96(2), pages 247-260, June.
    21. Johnston, Andrew & Huggins, Robert, 2018. "Partner selection and university-industry linkages: Assessing small firms' initial perceptions of the credibility of their partners," Technovation, Elsevier, vol. 78(C), pages 15-26.
    22. Josep‐Maria Arauzo‐Carod, 2008. "Industrial Location At A Local Level: Comments On The Territorial Level Of The Analysis," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 99(2), pages 193-208, April.
    23. Brian T. McCann & Jeffrey J. Reuer & Nandini Lahiri, 2016. "Agglomeration and the choice between acquisitions and alliances: An information economics perspective," Strategic Management Journal, Wiley Blackwell, vol. 37(6), pages 1085-1106, June.
    24. José A. Borello & Hernán Morhorlang & Diego Silva Failde, 2011. "Agglomeration Economies in Semi-industrialized Countries: Evidence from Argentina," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 3(3), pages 487-518, October.
    25. Memarian, Mahsa & Benetti, Sara & Trejos, Alberto & Rodríguez-Chaves, Sofía, 2023. "Bank concentration, urban development and firm access to credit in Latin America," Finance Research Letters, Elsevier, vol. 54(C).

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