Agglomerations and firm performance: who benefits and how much?

Abstract

Agglomerations and firm performance: who benefits and how much? Regional Studies. Agglomeration can generate gains. If it does, how does it work and how are those gains distributed across agglomerated firms? The paper examines the effect of localization externalities on innovation. Localization externalities are measured as industry specialization or a firm’s co-location in a relatively high own-industry employment region. By analyzing a large dataset of 6697 firms integrated with another regional agglomeration-related dataset, results show that (1) co-location in an agglomeration has a positive influence on a firm’s innovative performance; and (2) firms benefit heterogeneously from agglomerations, with benefits being distributed asymmetrically. Agglomeration gains exist but not all firms benefit equally.