40 Pages Posted: 13 Oct 2016
Date Written: October 12, 2016
Firm clustering is positively correlated with productivity, and it exhibits significant cross-sectional variation across industries. Thus, it is important to understand the industry characteristics that drive firms’ decisions to co-locate. We develop a model of knowledge sharing and derive the prediction that riskier and more complex industries experience the greatest gains from knowledge spillovers. Using tests that account for the non-randomness of location decisions, we find a strong positive relationship between industry risk or complexity and the clustering of: 1) firms’ headquarters, 2) patent inventors, and 3) R&D expenses. Customer-supplier proximity is also significantly and positively related to industry risk and complexity.
Keywords: Agglomeration, Industrial Clustering, Knowledge Spillovers, Innovation, R&D, Investment, Customer-Supplier
JEL Classification: R1, R3, L1, O3
Suggested Citation: Suggested Citation
Grieser, William David and Maturana, Gonzalo and Truffa, Santiago, Clustering to Coordinate: Who Benefits from Knowledge Spillovers? (October 12, 2016). Available at SSRN: https://ssrn.com/abstract=2851588