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Clustering, competition, and spillover effects: Evidence from Cambodia


  • Chhair, Sokty
  • Newman, Carol


The potential benefits of the geographical clustering of economic activity have been well documented in the literature, yet there is little empirical evidence quantifying these effects in developing country contexts. This is surprising given the emphasis in industrial policy on productivity growth and the potential gains that could be made by facilitating cluster formation. It is also possible that for some firms there may be disadvantages associated with locating close to competitors, in particular if they sell to customers located in the same geographic area. These represent a large proportion of firms in developing country settings at the early stage of industrialization, where physical infrastructure is underdeveloped and there are a large number of informal and service sector firms that often exclusively rely on customers in local markets. Using data on the population of all firms in Cambodia we investigate the pattern of firm clustering and explore the extent to which it leads to productivity-enhancing effects. We focus on two channels, a competition and a spillover channel and investigate the types of firms that benefit or suffer as a result of geographical clustering. We find strong negative competition effects associated with clustering for formal and manufacturing firms. We find some evidence of productivity spillovers for informal firms and firms in the manufacturing sector but they are not of a large enough magnitude to outweigh the negative competition effects observed.

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  • Chhair, Sokty & Newman, Carol, 2014. "Clustering, competition, and spillover effects: Evidence from Cambodia," WIDER Working Paper Series 065, World Institute for Development Economic Research (UNU-WIDER).
  • Handle: RePEc:unu:wpaper:wp2014-065

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    References listed on IDEAS

    1. Gladwin, Christina H. & Thomson, Anne M. & Peterson, Jennifer S. & Anderson, Andrea S., 2001. "Addressing food security in Africa via multiple livelihood strategies of women farmers," Food Policy, Elsevier, vol. 26(2), pages 177-207, April.
    2. Agarwal, Bina, 2009. "Gender and forest conservation: The impact of women's participation in community forest governance," Ecological Economics, Elsevier, vol. 68(11), pages 2785-2799, September.
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    Cited by:

    1. Marco Sanfilippo & Adnan Seric, 2016. "Spillovers from agglomerations and inward FDI: a multilevel analysis on sub-Saharan African firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(1), pages 147-176, February.
    2. Carol Newman & John Page, 2017. "Industrial clusters: The case for Special Economic Zones in Africa," WIDER Working Paper Series 015, World Institute for Development Economic Research (UNU-WIDER).
    3. Howard, Emma & Newman, Carol & Rand, John & Tarp, Finn, 2014. "Productivity-enhancing manufacturing clusters: Evidence from Vietnam," WIDER Working Paper Series 071, World Institute for Development Economic Research (UNU-WIDER).
    4. Beladi, Hamid & Dutta, Meghna & Kar, Saibal, 2016. "FDI and Business Internationalization of the Unorganized Sector: Evidence from Indian Manufacturing," World Development, Elsevier, vol. 83(C), pages 340-349.

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    clustering; productivity spillovers; competition effects; informal firms; Cambodia;

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