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Agglomeration, Coordination, and Corporate Investment

59 Pages Posted: 13 Oct 2016 Last revised: 10 Nov 2017

William David Grieser

Texas Christian University

Gonzalo Maturana

Emory University - Goizueta Business School

Santiago Truffa

Tulane University - Finance & Economics

Date Written: November 10, 2017

Abstract

Firm clustering is positively correlated with productivity, and it exhibits significant variation across industries. Yet, the connection between clustering and corporate investment remains underexplored. We develop a model of information sharing which predicts that knowledge-intensive industries and industries with more uncertainty gain the most from clustering due to the subsequent improvement in project selection. Accounting for nonrandom location decisions, we find a strong positive relationship between (a) industry uncertainty and knowledge intensity and (b) the proximity of headquarters, patent inventors, and customer--suppliers. Similarity in the timing and level of investment expenditures is also positively related to proximity 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 David and Maturana, Gonzalo and Truffa, Santiago, Agglomeration, Coordination, and Corporate Investment (November 10, 2017). Available at SSRN: https://ssrn.com/abstract=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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