Do Marshallian Sources Drive Technological Relatedness? Implications for Firm Survival and Subsequent Success in China
43 Pages Posted: 7 Nov 2016
Date Written: November 6, 2016
Abstract
Relying on a large panel of Chinese firms, this paper attempts to investigate the effects of technological relatedness on firm survival and subsequent success, e.g. profits and productivity. The results show that related establishments that colocate together outperform their counterparts located elsewhere, although it is not clear whether these findings are due to the presence of externalities or alternative explanations. To explore this issue, several proxies for the Marshallian sources of relatedness are further developed to better reveal the underlying mechanisms that drive relatedness. The findings show that technological proximity helps to respectively reduce the costs of moving goods, people, and ideas, thus provide strong support for Marshallian theories of agglomeration. The ownership structure of the firm matters, however. Specifically, wholly privately-owned enterprises are more successful than firms where the state is a minority shareholder at converting technological related spillovers into higher profits and higher efficiency gains.
Keywords: Firm Survival, Profits, TFP, Relatedness, Marshallian Sources, China
JEL Classification: O18, R11, L26, C41
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