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Clustering and firm performance in project-based industries: the case of the global video game industry , 1972--2007

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  • Mathijs De Vaan
  • Ron Boschma
  • Koen Frenken

Abstract

Explanations of spatial clustering based on localization externalities are being questioned by recent empirical evidence showing that firms in clusters do not outperform firms outside clusters. We propose that these findings may be driven by the particularities of the industrial settings chosen in these studies. We argue that in project-based industries, negative localization externalities associated with competition grow proportionally with cluster size, while positive localization externalities increase more than proportionally related to cluster size. By studying the survival patterns of 4,607 firms and 1,229 subsidiaries in the global video game industry, we find that the net effect of clustering becomes positive after a cluster reaches a critical size. We further unravel the subtleties of the video game industry by differentiating between exits by failure and exit by acquisition, and conclude that being acquired is best considered as a sign of success rather than as a business failure.
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Suggested Citation

  • Mathijs De Vaan & Ron Boschma & Koen Frenken, 2013. "Clustering and firm performance in project-based industries: the case of the global video game industry , 1972--2007," Journal of Economic Geography, Oxford University Press, vol. 13(6), pages 965-991, November.
    • Handle: RePEc:oup:jecgeo:v:13:y:2013:i:6:p:965-991
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    File URL: http://hdl.handle.net/10.1093/jeg/lbs038
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    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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