Regional Industrial Dominance, Agglomeration Economies, and Manufacturing Plant Productivity

54 Pages Posted: 5 Mar 2008

See all articles by Joshua M. Drucker

Joshua M. Drucker

University of Illinois at Chicago - Department of Urban Planning and Policy

Edward Feser

University of Illinois at Urbana-Champaign - Department of Urban and Regional Planning & Regional Economic Applications Laboratory (REAL)

Date Written: December 1, 2007

Abstract

In a seminal article, Benjamin Chinitz (1961) focused attention on the effects that industry size, structure, and economic diversification have on firm performance and regional economies. He also raised a related but conceptually distinct question that has been overlooked since: how does the extent to which a regional industry is concentrated in a single or small number of firms impact the performance of other local firms within that industry? He suggested that such regional industrial dominance may impact input prices, limit capital accessibility, deter entrepreneurial activity, and reduce the regional availability of agglomeration economies such as specialized labor and supply pools In this paper, we use an establishment-level production function to quantify the links between industrial dominance, agglomeration economies, and firm performance. We consider two questions. First, do greater levels of regional industrial dominance lead to lower economic performance by small, dominated manufacturing plants? Second, are small plants in dominated regional industries more limited in capturing regional agglomeration benefits and therefore do they face rigidities in deploying production factors to maximum advantage? Our results suggest that regional industrial organization does influence productivity but that the effect tends to be a direct one, rather than an indirect effect via its influence on agglomeration economies.

Keywords: Regional Industrial Dominance

Suggested Citation

Drucker, Joshua M. and Feser, Edward, Regional Industrial Dominance, Agglomeration Economies, and Manufacturing Plant Productivity (December 1, 2007). US Census Bureau Center for Economic Studies Paper No. CES-07-31, Available at SSRN: https://ssrn.com/abstract=1103067 or http://dx.doi.org/10.2139/ssrn.1103067

Joshua M. Drucker (Contact Author)

University of Illinois at Chicago - Department of Urban Planning and Policy ( email )

115 CUPPA Hall (CUPPAH)
Chicago, IL 60607-7065
United States
312-413-7597 (Phone)
312-413-2314 (Fax)

HOME PAGE: http://www.uic.edu/cuppa/upp/Faculty/Drucker/Drucker.html

Edward Feser

University of Illinois at Urbana-Champaign - Department of Urban and Regional Planning & Regional Economic Applications Laboratory (REAL) ( email )

601 E John St
Champaign, IL Champaign 61820
United States

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