Inter- and intra-firm linkages: Evidence from microgeographic location patterns

Multiunit firms can draw on internal resources, thus their plants should depend less on external agglomeration benefits than comparable standalone plants. Because interacting at a distance is costly, multiunit firms should also be geographically 'compact'. We dissect the microgeographic location patterns of hundreds of thousands of Canadian establishments and find robust evidence for these predictions: multiunit firms are compact, and their plants locate in areas offering potentially less external agglomeration benefits. Within firms, plants with stronger vertical links are geographically more central. The latter effect is stronger for plants in high transport cost industries that produce durables and source a larger share of non-homogeneous inputs. These findings suggest that vertical supply chains are important in explaining firms' internal spatial organization.