IDEAS home Printed from https://ideas.repec.org/p/egu/wpaper/1528.html
   My bibliography  Save this paper

Industry Relatedness, Agglomeration Externalities and Firm Survival in China

Author

Listed:
  • Canfei He
  • Qi Guo
  • David Rigby

Abstract

The importance of agglomeration externalities for economic activities is widely recognized. Recent developments highlight the importance of industry relatedness to the performance of firms, industries and regions. This study explores the determinants of firm survival in China and tests the significance of industry relatedness using firm-level data over the period 1999-2007. Industry relatedness is developed from the co-occurrence analysis of paired industries. Results based on Cox regression models show that firms benefiting from industry relatedness and governmental supports are more likely to survive. However, the influence of relatedness varies across industries and provinces. This study highlights the significant influence of local forces on firm dynamics and enriches our understanding of regional industrial restructuring in China.

Suggested Citation

  • Canfei He & Qi Guo & David Rigby, 2015. "Industry Relatedness, Agglomeration Externalities and Firm Survival in China," Papers in Evolutionary Economic Geography (PEEG) 1528, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Sep 2015.
    • Handle: RePEc:egu:wpaper:1528
    as

    Download full text from publisher

    File URL: http://econ.geo.uu.nl/peeg/peeg1528.pdf
    File Function: Version September 2015
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Holger Görg & Eric Strobl, 2016. "Multinational Companies, Technology Spillovers and Plant Survival," World Scientific Book Chapters, in: MULTINATIONAL ENTERPRISES AND HOST COUNTRY DEVELOPMENT, chapter 16, pages 289-303, World Scientific Publishing Co. Pte. Ltd..
    2. Ron A. Boschma & Rik Wenting, 2007. "The spatial evolution of the British automobile industry: Does location matter?," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 16(2), pages 213-238, April.
    3. 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.
    4. Roberto Fontana & Lionel Nesta, 2009. "Product Innovation and Survival in a High-Tech Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 34(4), pages 287-306, June.
    5. Chun Yang & Haifeng Liao, 2010. "Industrial agglomeration of Hong Kong and Taiwanese manufacturing investment in China: a town-level analysis in Dongguan," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 45(3), pages 487-517, December.
    6. Pedro Martins & Yong Yang, 2009. "The impact of exporting on firm productivity: a meta-analysis of the learning-by-exporting hypothesis," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 145(3), pages 431-445, October.
    7. Inha Oh & Jeong-Dong Lee & Almas Heshmati & Gyoung-Gyu Choi, 2009. "Evaluation of credit guarantee policy using propensity score matching," Small Business Economics, Springer, vol. 33(3), pages 335-351, October.
    8. Frank M.H. Neffke & Martin Henning & Ron Boschma, 2012. "The impact of aging and technological relatedness on agglomeration externalities: a survival analysis," Journal of Economic Geography, Oxford University Press, vol. 12(2), pages 485-517, March.
    9. De Silva, Dakshina G. & McComb, Robert P., 2012. "Geographic concentration and high tech firm survival," Regional Science and Urban Economics, Elsevier, vol. 42(4), pages 691-701.
    10. Beaudry, Catherine & Schiffauerova, Andrea, 2009. "Who's right, Marshall or Jacobs? The localization versus urbanization debate," Research Policy, Elsevier, vol. 38(2), pages 318-337, March.
    11. Richard Ericson & Ariel Pakes, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(1), pages 53-82.
    12. Michael Fritsch & Udo Brixy & Oliver Falck, 2006. "The Effect of Industry, Region, and Time on New Business Survival – A Multi-Dimensional Analysis," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 28(3), pages 285-306, May.
    13. Glaeser, Edward L & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1992. "Growth in Cities," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1126-1152, December.
      • Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc.
      • Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
    14. Ron A. Boschma & Koen Frenken, 2006. "Why is economic geography not an evolutionary science? Towards an evolutionary economic geography," Journal of Economic Geography, Oxford University Press, vol. 6(3), pages 273-302, June.
    15. Fukunari Kimura & Kozo Kiyota, 2006. "Exports, FDI, and Productivity: Dynamic Evidence from Japanese Firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 142(4), pages 695-719, December.
    16. Yue, Changjun & Hua, Ping, 2002. "Does comparative advantage explains export patterns in China?," China Economic Review, Elsevier, vol. 13(2-3), pages 276-296.
    17. Rudai Yang & Canfei He, 2014. "The productivity puzzle of Chinese exporters: Perspectives of local protection and spillover effects," Papers in Regional Science, Wiley Blackwell, vol. 93(2), pages 367-384, June.
    18. Mercedes Delgado & Michael E. Porter & Scott Stern, 2010. "Clusters and entrepreneurship," Journal of Economic Geography, Oxford University Press, vol. 10(4), pages 495-518, July.
    19. Giorgia Giovannetti & Giorgio Ricchiuti & Margherita Velucchi, 2011. "Size, innovation and internationalization: a survival analysis of Italian firms," Applied Economics, Taylor & Francis Journals, vol. 43(12), pages 1511-1520.
    20. Nolan, Peter & Xiaoqiang, Wang, 1999. "Beyond privatization: Institutional innovation and growth in China's large state-owned enterprises," World Development, Elsevier, vol. 27(1), pages 169-200, January.
    21. Jordi Jofre-Monseny & Raquel Marín-López & Elisabet Viladecans-Marsal, 2014. "The Determinants Of Localization And Urbanization Economies: Evidence From The Location Of New Firms In Spain," Journal of Regional Science, Wiley Blackwell, vol. 54(2), pages 313-337, March.
    22. Duranton, Gilles & Puga, Diego, 2004. "Micro-foundations of urban agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 48, pages 2063-2117, Elsevier.
    23. Frank Neffke & Martin Henning & Ron Boschma, 2011. "How Do Regions Diversify over Time? Industry Relatedness and the Development of New Growth Paths in Regions," Economic Geography, Clark University, vol. 87(3), pages 237-265, July.
    24. Brandt, Loren & Van Biesebroeck, Johannes & Zhang, Yifan, 2012. "Creative accounting or creative destruction? Firm-level productivity growth in Chinese manufacturing," Journal of Development Economics, Elsevier, vol. 97(2), pages 339-351.
    25. Lin, Hui-Lin & Li, Hsiao-Yun & Yang, Chih-Hai, 2011. "Agglomeration and productivity: Firm-level evidence from China's textile industry," China Economic Review, Elsevier, vol. 22(3), pages 313-329, September.
    26. Canfei He, 2002. "Information costs, agglomeration economies and the location of foreign direct investment in China1," Regional Studies, Taylor & Francis Journals, vol. 36(9), pages 1029-1036.
    27. Thun, Eric, 2004. "Keeping Up with the Jones': Decentralization, Policy Imitation, and Industrial Development in China," World Development, Elsevier, vol. 32(8), pages 1289-1308, August.
    28. Jiangyong Lu, 2010. "Agglomeration of Economic Activities in China: Evidence from Establishment Censuses," Regional Studies, Taylor & Francis Journals, vol. 44(3), pages 281-297.
    29. Andrew B. Bernard & Fredrik Sjoholm, 2003. "Foreign Owners and Plant Survival," NBER Working Papers 10039, National Bureau of Economic Research, Inc.
    30. Audretsch, David B & Mahmood, Talat, 1995. "New Firm Survival: New Results Using a Hazard Function," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 97-103, February.
    31. Bai, Chong-En & Du, Yingjuan & Tao, Zhigang & Tong, Sarah Y., 2004. "Local protectionism and regional specialization: evidence from China's industries," Journal of International Economics, Elsevier, vol. 63(2), pages 397-417, July.
    32. Silviano Pérez & Amparo Llopis & Juan Llopis, 2004. "The Determinants of Survival of Spanish Manufacturing Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 25(3), pages 251-273, August.
    33. Allen J. Scott & Michael Storper, 2015. "The Nature of Cities: The Scope and Limits of Urban Theory," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 39(1), pages 1-15, January.
    34. Zoltán J. Ács & Catherine Armington & Ting Zhang, 2015. "The determinants of new-firm survival across regional economies: The role of human capital stock and knowledge spillover," Chapters, in: Global Entrepreneurship, Institutions and Incentives, chapter 18, pages 344-368, Edward Elgar Publishing.
    35. Udo Staber, 2001. "Spatial Proximity and Firm Survival in a Declining Industrial District: The Case of Knitwear Firms in Baden-Wu¨rttemberg," Regional Studies, Taylor & Francis Journals, vol. 35(4), pages 329-341.
    36. Antony Potter & H. Doug Watts, 2014. "Revisiting Marshall's Agglomeration Economies: Technological Relatedness and the Evolution of the Sheffield Metals Cluster," Regional Studies, Taylor & Francis Journals, vol. 48(4), pages 603-623, April.
    37. Barbieri, Elisa & Di Tommaso, Marco R. & Bonnini, Stefano, 2012. "Industrial development policies and performances in Southern China: Beyond the specialised industrial cluster program," China Economic Review, Elsevier, vol. 23(3), pages 613-625.
    38. C. A. Hidalgo & B. Klinger & A. -L. Barabasi & R. Hausmann, 2007. "The Product Space Conditions the Development of Nations," Papers 0708.2090, arXiv.org.
    39. Sandra Poncet, 2005. "A Fragmented China: Measure and Determinants of Chinese Domestic Market Disintegration," Review of International Economics, Wiley Blackwell, vol. 13(3), pages 409-430, August.
    40. Canfei He & Fenghua Pan, 2010. "Economic Transition, Dynamic Externalities and City-industry Growth in China," Urban Studies, Urban Studies Journal Limited, vol. 47(1), pages 121-144, January.
    41. Canfei He & Yehua Dennis Wei & Xiuzhen Xie, 2008. "Globalization, Institutional Change, and Industrial Location: Economic Transition and Industrial Concentration in China," Regional Studies, Taylor & Francis Journals, vol. 42(7), pages 923-945.
    42. Karl Wennberg & Göran Lindqvist, 2010. "The effect of clusters on the survival and performance of new firms," Small Business Economics, Springer, vol. 34(3), pages 221-241, April.
    43. Koen Frenken & Frank Van Oort & Thijs Verburg, 2007. "Related Variety, Unrelated Variety and Regional Economic Growth," Regional Studies, Taylor & Francis Journals, vol. 41(5), pages 685-697.
    44. Zuohong Pan & Fan Zhang, 2002. "Urban Productivity in China," Urban Studies, Urban Studies Journal Limited, vol. 39(12), pages 2267-2281, November.
    45. Henderson, Vernon, 1997. "Externalities and Industrial Development," Journal of Urban Economics, Elsevier, vol. 42(3), pages 449-470, November.
    46. David L. Rigby & W. Mark Brown, 2015. "Who Benefits from Agglomeration?," Regional Studies, Taylor & Francis Journals, vol. 49(1), pages 28-43, January.
    47. Ron Boschma, 2005. "Proximity and Innovation: A Critical Assessment," Regional Studies, Taylor & Francis Journals, vol. 39(1), pages 61-74.
    48. Zhou, Wubiao, 2009. "Bank Financing in China's Private Sector: The Payoffs of Political Capital," World Development, Elsevier, vol. 37(4), pages 787-799, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kroll Henning & Neuhäusler Peter, 2020. "Recent Trends of Regional Development in China – Technological Portfolios and Economic Growth," ZFW – Advances in Economic Geography, De Gruyter, vol. 64(1), pages 14-27, March.
    2. Teresa Farinha & Pierre-Alexandre Balland & Andrea Morrison & Ron Boschma, 2019. "What drives the geography of jobs in the US? Unpacking relatedness," Industry and Innovation, Taylor & Francis Journals, vol. 26(9), pages 988-1022, October.
    3. Sabrina Aufiero & Giordano De Marzo & Angelica Sbardella & Andrea Zaccaria, 2023. "Mapping job complexity and skills into wages," Papers 2304.05251, arXiv.org.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shengjun Zhu & Canfei He & Qian Luo, 2019. "Good neighbors, bad neighbors: local knowledge spillovers, regional institutions and firm performance in China," Small Business Economics, Springer, vol. 52(3), pages 617-632, March.
    2. Canfei He & Qi Guo & David Rigby, 2017. "What sustains larger firms? Evidence from Chinese manufacturing industries," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 58(2), pages 275-300, March.
    3. Canfei He & Rudai Yang, 2016. "Determinants of Firm Failure: Empirical Evidence from China," Growth and Change, Wiley Blackwell, vol. 47(1), pages 72-92, March.
    4. Canfei He & Yan Yan & David Rigby, 2015. "Regional Industrial Evolution in China: Path Dependence or Path Creation?," Papers in Evolutionary Economic Geography (PEEG) 1520, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Jul 2015.
    5. Qi Guo & Canfei He & Deyu Li, 2016. "Entrepreneurship in China: The role of localisation and urbanisation economies," Urban Studies, Urban Studies Journal Limited, vol. 53(12), pages 2584-2606, September.
    6. Delgado, Mercedes & Porter, Michael E. & Stern, Scott, 2014. "Clusters, convergence, and economic performance," Research Policy, Elsevier, vol. 43(10), pages 1785-1799.
    7. Ron Boschma & Koen Frenken, 2011. "The emerging empirics of evolutionary economic geography," Journal of Economic Geography, Oxford University Press, vol. 11(2), pages 295-307, March.
    8. Tavassoli, Sam & Jienwatcharamongkhol, Viroj & Arenius, Pia, 2021. "Colocation of Entrepreneurs and New Firm Survival: Role of New Firm Founder’s Experiential Relatedness to Local Entrepreneurs," Papers in Innovation Studies 2021/13, Lund University, CIRCLE - Centre for Innovation Research.
    9. Kim, Jungho & Kollmann, Trevor & Palangkaraya, Alfons & Webster, Elizabeth, 2022. "Does local technological specialisation, diversity and dynamic competition enhance firm creation?," Research Policy, Elsevier, vol. 51(7).
    10. Ron Boschma & Koen Frenken, 2015. "Evolutionary Economic Geography," Papers in Evolutionary Economic Geography (PEEG) 1518, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised May 2015.
    11. Sam Tavassoli & Viroj Jienwatcharamongkhol, 2016. "Survival of entrepreneurial firms: the role of agglomeration externalities," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 28(9-10), pages 746-767, October.
    12. Roberto Ercole & Robert O'neill, 2017. "The Influence of Agglomeration Externalities on Manufacturing Growth Within Indonesian Locations," Growth and Change, Wiley Blackwell, vol. 48(1), pages 91-126, March.
    13. Koen Frenken & Elena Cefis & Erik Stam, 2020. "Industrial Dynamics and Clusters: A Survey," Regional Studies, Taylor & Francis Journals, vol. 49(1), pages 10-27, July.
    14. Frank Neffke & Martin Henning, 2011. "Inter-industry linkages in local economies," ERSA conference papers ersa11p1075, European Regional Science Association.
    15. Ron Boschma, 2015. "Do spinoff dynamics or agglomeration externalities drive industry clustering? A reappraisal of Steven Klepper’s work," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 24(4), pages 859-873.
    16. Niccolò Innocenti & Luciana Lazzeretti, 2018. "Relatedness and growth: The impact of creative industries to the wider economy," Papers in Evolutionary Economic Geography (PEEG) 1819, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Apr 2018.
    17. Nils Grashof & Dirk Fornahl, 2020. "To be or not to be located in a cluster? A descriptive meta-analysis of the firm-specific cluster effect," Working Papers on Innovation and Space 2020-01, Philipps University Marburg, Department of Geography.
    18. Liang, Jiaochen & Goetz, Stephan J., 2018. "Technology intensity and agglomeration economies," Research Policy, Elsevier, vol. 47(10), pages 1990-1995.
    19. Nils Grashof & Dirk Fornahl, 2021. "“To be or not to be” located in a cluster?—A descriptive meta-analysis of the firm-specific cluster effect," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 67(3), pages 541-591, December.
    20. Vera Barinova & Stepan Zemtsov, 2015. "SME?s cluster identification in Russia," ERSA conference papers ersa15p572, European Regional Science Association.

    More about this item

    Keywords

    Industry relatedness; Agglomeration Externalities; Firm Survival; China;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:egu:wpaper:1528. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/deguunl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.