Close, But Not the Same: Locally Headquartered Organizations and Agglomeration Economies in a Declining Industry

Abstract:     
Departing from research on expanding, high-technology industries, we study the impact of agglomeration in a declining, low-technology industry. The setting is U.S. footwear manufacturing between 1975 and 1991, when import competition rendered local support critical for survival. We examine how agglomeration-related survival benefits depended upon the presence of locally headquartered manufacturing plants and whether such benefits came at the expense of other local industries. Consistent with ecological arguments, plant failure rates were higher in agglomerations but this effect was attenuated and, in some cases, reversed in agglomerations with more locally headquartered plants. Moreover, only locally headquartered plants experienced such benefits; remotely headquartered plants failed at higher rates in agglomerations. Although more footwear manufacturing jobs were retained in agglomerations with many locally headquartered plants, such locales also exhibited lower manufacturing job growth in other industries. These findings lend greater generalizability to agglomeration theories and also imply trade-offs at the community level.

Keywords: agglomeration, geography, cluster, community, survival, manufacturing, footwear

JEL Classification: L23, L60, L67, R30

Accepted Paper Series