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Transaction Costs, Agglomeration Economies, and Industrial Location

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  • GAVIN A. WOOD
  • JOHN B. PARR

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. Copyright 2005 Blackwell Publishing Ltd..

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.
  • Handle: RePEc:bla:growch:v:36:y:2005:i:1:p:1-15
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    Cited by:

    1. Rubiera-Morollón, Fernando & Fernández-Vázquez , Esteban & Aponte-Jaramillo, Elizabeth, 2012. "Estimation and analysis of labor productivity in Spanish cities," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 22, pages 129-151.
    2. Ilenia Epifani & Rosella Nicolini, 2013. "On The Population Density Distribution Across Space: A Probabilistic Approach," Journal of Regional Science, Wiley Blackwell, vol. 53(3), pages 481-510, August.
    3. Mark Drabenstott, 2005. "A review of the federal role in regional economic development," Monograph, Federal Reserve Bank of Kansas City, number 2005arotfrire, Jan 10.
    4. David Jacobson & Francesco Garibaldo, 2011. "The Role of Company Networks in Low-tech Industries," Chapters,in: Knowledge Transfer and Technology Diffusion, chapter 4 Edward Elgar Publishing.
    5. John Quiggin, 2005. "Localisation, globalisation and finance," Australian Public Policy Program Working Papers WP5P05, Risk and Sustainable Management Group, University of Queensland.
    6. 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.
    7. Giulio Cainelli & Donato Iacobucci, 2012. "Agglomeration, Related Variety, and Vertical Integration," Economic Geography, Clark University, vol. 88(3), pages 255-277, July.
    8. 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.
    9. repec:bla:presci:v:96:y:2017:i:2:p:247-260 is not listed on IDEAS
    10. 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.
    11. John Quiggin, 2006. "Cities, connections and cronyism," Australian Public Policy Program Working Papers WP3P06, Risk and Sustainable Management Group, University of Queensland.
    12. 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.
    13. Mario Polese & Richard Shearmur, 2006. "Growth and Location of Economic Activity: The Spatial Dynamics of Industries in Canada 1971-2001," Growth and Change, Wiley Blackwell, vol. 37(3), pages 362-395.
    14. Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
    15. 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.
    16. 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.
    17. 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.

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