Agglomeration, Coordination, and Corporate Investment

65 Pages Posted: 13 Oct 2016 Last revised: 8 Sep 2020

See all articles by William Grieser

William Grieser

Texas Christian University

Gonzalo Maturana

Emory University - Goizueta Business School

Santiago Truffa

Tulane University - Finance & Economics

Date Written: September 4, 2020

Abstract

Firm agglomeration is positively correlated with productivity, and it exhibits significant heterogeneity across industries. Yet, the connection between agglomeration and corporate investment remains underexplored. We develop a model of information sharing which predicts that knowledge-intensive industries and industries with more uncertainty benefit the most from agglomeration due to the subsequent improvement in project selection. Using simulated counterfactuals, we find a strong positive relationship between industry uncertainty/knowledge intensity and the proximity of headquarters (patent inventors). Additionally, we exploit techniques designed to estimate peer effects, and we find that the strength of investment externalities is positively related to agglomeration and uncertainty/knowledge intensity.

Keywords: Agglomeration, Industrial Clustering, Knowledge Spillovers, Innovation, R&D, Investment, Customer--Supplier

JEL Classification: R1, R3, L1, O3

Suggested Citation

Grieser, William and Maturana, Gonzalo and Truffa, Santiago, Agglomeration, Coordination, and Corporate Investment (September 4, 2020). Available at SSRN: https://ssrn.com/abstract=2851588 or http://dx.doi.org/10.2139/ssrn.2851588

William Grieser

Texas Christian University ( email )

Fort Worth, TX 76129
United States

Gonzalo Maturana (Contact Author)

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States

HOME PAGE: http://www.gonzalomaturana.com/

Santiago Truffa

Tulane University - Finance & Economics ( email )

A.B. Freeman School of Business
7 McAlister Drive
New Orleans, LA 70118
United States

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